UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q





(MARK
ONE)


x
            QUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





FOR THE
QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009




OR




 ̈
            TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





FOR THE
TRANSITION PERIOD FROM
            
TO





COMMISSION
FILE NUMBER 1-15997





ENTRAVISION
COMMUNICATIONS CORPORATION


(Exact
name of registrant as specified in its charter)


Delaware
            
            95-4783236(State
      or other jurisdiction ofincorporation
      or organization)
            
            (I.R.S.
      EmployerIdentification
      No.)





2425
Olympic Boulevard, Suite 6000 West, Santa
Monica, California 90404


(Address
of principal executive offices) (Zip Code)





(310)
447-3870


(Registrant’s
telephone number, including area code)





N/A


(Former
name, former address and former fiscal year, if changed since last
report)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


Yes x No  ̈




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).




Yes  ̈ No  ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer.  See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange
Act. (Check one):





Large
      accelerated filer  ̈
              Accelerated
      filer xNon-accelerated
      filer  ̈
              Smaller
      reporting company  ̈


Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes  ̈ No x





As of
November 2, 2009, there were 51,882,443 shares, $0.0001 par value per share, of
the registrant’s Class A common stock outstanding, 22,587,433 shares, $0.0001
par value per share, of the registrant’s Class B common stock outstanding and
9,352,729 shares, $0.0001 par value per share, of the registrant’s Class U
common stock outstanding.


ENTRAVISION
COMMUNICATIONS CORPORATION





FORM
10-Q FOR THE THREE- AND NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2009





TABLE
OF CONTENTS





Page
              NumberPART
      I. FINANCIAL INFORMATIONITEM 1.
            
            FINANCIAL
      STATEMENTS
            
            3CONSOLIDATED
      BALANCE SHEETS AS OF SEPTEMBER 30, 2009 (UNAUDITED) AND DECEMBER 31,
      2008
            
            3CONSOLIDATED
      STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE- AND NINE-MONTH PERIODS
      ENDED SEPTEMBER 30, 2009 AND SEPTEMBER 30, 2008
            
            4CONSOLIDATED
      STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE-MONTH PERIODS ENDED
      SEPTEMBER 30, 2009 AND SEPTEMBER 30, 2008
            
            5NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
            
            6ITEM
      2.
            
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
            
            16ITEM
      3.
            
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            
            30ITEM
      4.
            
            CONTROLS
      AND PROCEDURES
            
            31PART
      II. OTHER INFORMATIONITEM
      1.
            
            LEGAL
      PROCEEDINGS
            
            31ITEM
      1A.
            
            RISK
      FACTORS
            
            31ITEM
      2.
            
            UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
            
            31ITEM
      3.
            
            DEFAULTS
      UPON SENIOR SECURITIES
            
            32ITEM
      4.
            
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
            
            32ITEM
      5.
            
            OTHER
      INFORMATION
            
            32ITEM
      6.
            
            EXHIBITS
            
            32




1


Forward-Looking
Statements





This
document contains “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934. All statements
other than statements of historical fact are “forward-looking statements” for
purposes of federal and state securities laws, including, but not limited to,
any projections of earnings, revenue or other financial items; any statements of
the plans, strategies and objectives of management for future operations; any
statements concerning proposed new services or developments; any statements
regarding future economic conditions or performance; any statements of belief;
and any statements of assumptions underlying any of the foregoing.





Forward-looking
statements may include the words “may,” “could,” “will,” “estimate,” “intend,”
“continue,” “believe,” “expect” or “anticipate” or other similar words. These
forward-looking statements present our estimates and assumptions only as of the
date of this annual report. Except for our ongoing obligation to disclose
material information as required by the federal securities laws, we do not
intend, and undertake no obligation, to update any forward-looking
statement.





Although
we believe that the expectations reflected in any of our forward-looking
statements are reasonable, actual results could differ materially from those
projected or assumed in any of our forward-looking statements. Our future
financial condition and results of operations, as well as any forward-looking
statements, are subject to change and inherent risks and uncertainties. Some of
the key factors impacting these risks and uncertainties include, but are not
limited to:





•
            risks
      related to our history of operating losses, our substantial indebtedness
      or our ability to raise capital;





•
            provisions
      of the agreements governing our debt instruments, including the amended
      credit facility agreement governing our syndicated bank credit facility,
      or the amended credit facility agreement, which restricts certain aspects
      of the operation of our business;





•
            our
      continued compliance with all of our obligations, including financial
      covenants and ratios, under the amended credit facility
      agreement;





•
            cancellations
      or reductions of advertising, whether due to the ongoing global financial
      crisis, the recession or otherwise;





•
            our
      relationship with Univision Communications Inc., or
    Univision;





•
            subject
      to limitations contained in the amended credit facility agreement, the
      overall success of our acquisition strategy, which includes developing
      media clusters in key U.S. Hispanic markets, and the integration of any
      acquired assets with our existing
business;





•
            the
      impact of rigorous competition in Spanish-language media and in the
      advertising industry generally;





•
            industry-wide
      market factors and regulatory and other developments affecting our
      operations;





•
            the
      duration and severity of the ongoing global financial crisis and the
      recession;





•
            the
      effectiveness of our recently-implemented cost-saving measures;
      and





•
            the
      impact of any impairment of our
assets.





For a
detailed description of these and other factors that could cause actual results
to differ materially from those expressed in any forward-looking statement,
please see the section entitled “Risk Factors,” beginning on page 24 of our
Annual Report on Form 10-K for the year ended December 31, 2008.


2


PART
I





FINANCIAL
INFORMATION




ITEM
1.    FINANCIAL STATEMENTS





ENTRAVISION
COMMUNICATIONS CORPORATION


CONSOLIDATED
BALANCE SHEETS


(In
thousands, except share and per share data)


September
      30,
              
              
              December
      31,2009
              
              
              2008(Unaudited)ASSETSCurrent
      assetsCash
      and cash equivalents
              
              $
              20,824
              
              
              $
              64,294Trade
      receivables, net of allowance for doubtful accounts of $5,141 and $5,640
      (including related parties of $4,807 and $0)
              
              
              48,316
              
              
              
              44,855Prepaid
      expenses and other current assets (including related parties of $274 and
      $274)
              
              
              5,532
              
              
              
              5,252Total
      current assets
              
              
              74,672
              
              
              
              114,401Property
      and equipment, net
              
              
              83,298
              
              
              
              90,898Intangible
      assets subject to amortization, net (including related parties of $28,421
      and $30,161)
              
              
              29,381
              
              
              
              31,380Intangible
      assets not subject to amortization
              
              
              294,127
              
              
              
              298,042Goodwill
              
              
              45,845
              
              
              
              45,845Other
      assets
              
              
              9,661
              
              
              
              10,473Total
      assets
              
              $
              536,984
              
              
              $
              591,039LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesCurrent
      maturities of long-term debt (including related parties of $1,000 and
      $1,000)
              
              $
              1,000
              
              
              $
              1,002Advances
      payable, related parties
              
              
              118
              
              
              
              118Accounts
      payable, accrued expenses and other liabilities (including related parties
      of $3,890 and $4,092)
              
              
              52,208
              
              
              
              57,647Total
      current liabilities
              
              
              53,326
              
              
              
              58,767Long-term
      debt, less current maturities (including related parties of $1,000 and
      $2,000)
              
              
              362,949
              
              
              
              405,521Other
      long-term liabilities
              
              
              12,872
              
              
              
              14,038Deferred
      income taxes
              
              
              9,388
              
              
              
              -Total
      liabilities
              
              
              438,535
              
              
              
              478,326Commitments
      and contingencies (note 4)Stockholders'
      equityClass
      A common stock, $0.0001 par value, 260,000,000 shares authorized; shares
      issued2009
      53,027,123; 2008 45,877,400
              
              
              5
              
              
              
              5Class
      B common stock, $0.0001 par value, 40,000,000 shares authorized; shares
      issued andoutstanding
      2009 22,587,433; 2008 22,887,433
              
              
              2
              
              
              
              2Class
      U common stock, $0.0001 par value, 40,000,000 shares authorized; shares
      issued andoutstanding
      2009 9,352,729; 2008 15,652,729
              
              
              1
              
              
              
              2Additional
      paid-in capital
              
              
              936,134
              
              
              
              934,749Accumulated
      deficit
              
              
              (837,693
              )
              
              
              (822,045
              )98,449
              
              
              
              112,713Treasury
      stock, Class A common stock, $0.0001 par value, 2009 1,232,680 shares;
      2008 None
              
              
              -
              
              
              
              -Total
      stockholders' equity
              
              
              98,449
              
              
              
              112,713Total
      liabilities and stockholders' equity
              
              $
              536,984
              
              
              $
              591,039





See Notes
to Consolidated Financial Statements


3


ENTRAVISION
COMMUNICATIONS CORPORATION


CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)


(In
thousands, except share and per share data)


Three-Month
      Period
              
              
              Nine-Month
      PeriodEnded
      September 30,
              
              
              Ended
      September 30,2009
              
              
              2008
              
              
              2009
              
              
              2008Net
      revenue (including related parties of $0, $0, $0 and $182)
              
              $
              50,754
              
              
              $
              60,988
              
              
              $
              141,165
              
              
              $
              179,573Expenses:Direct
      operating expenses (including related parties of$1,676,
      $3,010, $5,407 and $8,582) (including non-cash stock-based
      compensation of $159, $173, $489 and $462)
              
              
              21,030
              
              
              
              25,583
              
              
              
              63,690
              
              
              
              76,258Selling,
      general and administrative expenses (including non-cashstock-based
      compensation of $204, $217, $618 and $579)
              
              
              9,542
              
              
              
              11,394
              
              
              
              28,341
              
              
              
              33,026Corporate
      expenses (including non-cash stock-basedcompensation
      of $339, $506, $1,098 and $1,409)
              
              
              3,351
              
              
              
              3,772
              
              
              
              10,602
              
              
              
              12,703Depreciation
      and amortization (includes directoperating
      of $3,806, $4,706, $11,724 and $13,432;selling,
      general and administrative of $1,156, $1,006, $3,245 and$2,991;
      and corporate of $310, $286, $924 and $762) (includingrelated
      parties of $580, $580, $1,740 and $1,740)
              
              
              5,272
              
              
              
              5,998
              
              
              
              15,893
              
              
              
              17,185Impairment
      charge
              
              
              -
              
              
              
              440,020
              
              
              
              2,720
              
              
              
              440,02039,195
              
              
              
              486,767
              
              
              
              121,246
              
              
              
              579,192Operating
      income (loss)
              
              
              11,559
              
              
              
              (425,779
              )
              
              
              19,919
              
              
              
              (399,619
              )Interest
      expense (including related parties of $29, $44, $89 and $156) (note
      2)
              
              
              (8,227
              )
              
              
              (8,172
              )
              
              
              (21,762
              )
              
              
              (27,595
              )Interest
      income
              
              
              70
              
              
              
              622
              
              
              
              388
              
              
              
              1,339Loss
      on debt extinguishment
              
              
              -
              
              
              
              -
              
              
              
              (4,716
              )
              
              
              -Income
      (loss) before income taxes
              
              
              3,402
              
              
              
              (433,329
              )
              
              
              (6,171
              )
              
              
              (425,875
              )Income
      tax (expense) benefit
              
              
              (2,802
              )
              
              
              78,847
              
              
              
              (9,311
              )
              
              
              76,167Income
      (loss) before equity in net income (loss) ofnonconsolidated
      affiliate and discontinued operations
              
              
              600
              
              
              
              (354,482
              )
              
              
              (15,482
              )
              
              
              (349,708
              )Equity
      in net income (loss) of nonconsolidated affiliate, net of
    tax
              
              
              73
              
              
              
              (9
              )
              
              
              (166
              )
              
              
              (173
              )Income
      (loss) from continuing operations
              
              
              673
              
              
              
              (354,491
              )
              
              
              (15,648
              )
              
              
              (349,881
              )Loss
      from discontinued operations,net
      of tax benefit of $0, $0, $0 and $604
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,573
              )Net
      income (loss) applicable to common stockholders
              
              $
              673
              
              
              $
              (354,491
              )
              
              $
              (15,648
              )
              
              $
              (351,454
              )Basic
      and diluted earnings per share:Net
      income (loss) per share from continuing operations applicable
      tocommon
      stockholders, basic and diluted
              
              $
              0.01
              
              
              $
              (3.98
              )
              
              $
              (0.19
              )
              
              $
              (3.80
              )Net
      loss per share from discontinued operations, basic and
    diluted
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              (0.02
              )Net
      income (loss) per share applicable to common stockholders,basic
      and diluted
              
              $
              0.01
              
              
              $
              (3.98
              )
              
              $
              (0.19
              )
              
              $
              (3.82
              )Weighted
      average common shares outstanding, basic
              
              
              83,683,908
              
              
              
              89,130,413
              
              
              
              84,049,423
              
              
              
              92,029,671Weighted
      average common shares outstanding, diluted
              
              
              83,935,319
              
              
              
              89,130,413
              
              
              
              84,049,423
              
              
              
              92,029,671





See Notes
to Consolidated Financial Statements


4


ENTRAVISION
COMMUNICATIONS CORPORATION


CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)


(In
thousands)




Nine-Month
      PeriodEnded
      September 30,2009
              
              
              2008Cash
      flows from operating activities:Net
      loss
              
              $
              (15,648
              )
              
              $
              (351,454
              )Adjustments
      to reconcile net loss to net cash provided by operating
      activities:Depreciation
      and amortization
              
              
              15,893
              
              
              
              17,185Impairment
      charge
              
              
              2,720
              
              
              
              440,020Deferred
      income taxes
              
              
              8,534
              
              
              
              (77,537
              )Amortization
      of debt issue costs
              
              
              298
              
              
              
              302Amortization
      of syndication contracts
              
              
              1,689
              
              
              
              2,255Payments
      on syndication contracts
              
              
              (2,119
              )
              
              
              (2,135
              )Equity
      in net loss of nonconsolidated affiliate
              
              
              166
              
              
              
              173Non-cash
      stock-based compensation
              
              
              2,205
              
              
              
              2,450Gain
      on sale of media properties and other assets
              
              
              (102
              )
              
              
              -Non-cash
      expenses related to debt extinguishment
              
              
              945
              
              
              
              -Change
      in fair value of interest rate swap agreements
              
              
              (3,850
              )
              
              
              3,647Changes
      in assets and liabilities, net of effect of acquisitions and
      dispositions:(Increase)
      decrease in accounts receivable
              
              
              (3,100
              )
              
              
              3,648Increase
      in prepaid expenses and other assets
              
              
              (621
              )
              
              
              (100
              )Increase
      (decrease) in accounts payable, accrued expenses and other
      liabilities
              
              
              3,187
              
              
              
              (3,205
              )Effect
      of discontinued operations
              
              
              -
              
              
              
              (2,230
              )Net
      cash provided by operating activities
              
              
              10,197
              
              
              
              33,019Cash
      flows from investing activities:Proceeds
      from sale of property and equipment and intangibles
              
              
              114
              
              
              
              101,498Purchases
      of property and equipment and intangibles
              
              
              (9,207
              )
              
              
              (13,415
              )Purchase
      of a business
              
              
              -
              
              
              
              (22,885
              )Deposits
      on acquisitions
              
              
              -
              
              
              
              (200
              )Effect
      of discontinued operations
              
              
              -
              
              
              
              (194
              )Net
      cash provided by (used in) investing activities
              
              
              (9,093
              )
              
              
              64,804Cash
      flows from financing activities:Proceeds
      from issuance of common stock
              
              
              255
              
              
              
              785Payments
      on long-term debt
              
              
              (42,572
              )
              
              
              (11,036
              )Repurchase
      of Class U common stock
              
              
              -
              
              
              
              (10,380
              )Repurchase
      of Class A common stock
              
              
              (1,075
              )
              
              
              (46,538
              )Excess
      tax benefits from exercise of stock options
              
              
              -
              
              
              
              (25
              )Payments
      of deferred debt and offering costs
              
              
              (1,182
              )
              
              
              -Net
      cash used in financing activities
              
              
              (44,574
              )
              
              
              (67,194
              )Net
      increase (decrease) in cash and cash equivalents
              
              
              (43,470
              )
              
              
              30,629Cash
      and cash equivalents:Beginning
              
              
              64,294
              
              
              
              86,945Ending
              
              $
              20,824
              
              
              $
              117,574Supplemental
      disclosures of cash flow information:Cash
      payments for:Interest
              
              $
              22,583
              
              
              $
              23,716Income
      taxes
              
              $
              777
              
              
              $
              1,395
  See Notes
to Consolidated Financial Statements  5


ENTRAVISION
COMMUNICATIONS CORPORATION
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 SEPTEMBER
30, 2009
  1.
BASIS OF PRESENTATION
 
 Presentation
 
 The
consolidated financial statements included herein have been prepared by
Entravision Communications Corporation (the “Company”), without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission (“SEC”).
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been omitted pursuant to such rules and regulations.
These consolidated financial statements and notes thereto should be read in
conjunction with the Company’s audited consolidated financial statements for the
year ended December 31, 2008 included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2008. The unaudited information contained
herein has been prepared on the same basis as the Company’s audited consolidated
financial statements and, in the opinion of the Company’s management, includes
all adjustments (consisting of only normal recurring adjustments) necessary for
a fair presentation of the information for the periods presented. The interim
results presented herein are not necessarily indicative of the results of
operations that may be expected for the full fiscal year ending December 31,
2009 or any other future period.





In June
2009, the Financial Accounting Standards Board (“FASB”) issued Statement of
Financial Accounting Standards (“SFAS”) No. 168, “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB Statement No. 162” (“SFAS 168”).  SFAS 168 made
the FASB Accounting Standards Codification (“ASC”), also known as the
“Codification”, the single source of authoritative nongovernmental U.S.
generally accepted accounting principles (“GAAP”), except for additional
authoritative rules and interpretive releases issued by the SEC.  The
Codification does not change current U.S. GAAP, but is intended to simplify user
access to all authoritative U.S. GAAP by organizing all the authoritative
literature related to a particular topic within a consistent
structure.  The Codification was effective for the Company’s financial
statements issued beginning in the quarter ending September 30,
2009.  All accounting references have been updated, and therefore SFAS
references have been replaced with ASC references.





Certain
amounts in the Company’s prior period notes to the financial statements have
been reclassified to conform to current period presentation. All discussions and
amounts in the consolidated financial statements and the related notes to
consolidated statements, for all periods presented relate to continuing
operations only, unless otherwise noted.





Discontinued
Operations





The
Company sold the outdoor advertising business in May 2008 and no longer has
outdoor operations.  In accordance with ASC 360-10-45, “Impairment or
Disposal of Long-Lived Assets”, the Company has reported the results of its
outdoor advertising operations for all periods in discontinued operations within
the consolidated statements of operations. In the consolidated statements of
cash flows, the cash flows of discontinued operations have been reclassified for
all periods presented and are separately classified within the respective
categories with those of continuing operations.





Liquidity
and Capital Resources





As a
result of the ongoing global financial crisis and the recession, and their
impact on the advertising marketplace and its customers, the Company has
experienced declining net revenues, which have had a significant negative impact
on its cash flows and consolidated adjusted EBITDA as defined as net income
(loss) plus loss (gain) on sale of assets, depreciation and amortization,
non-cash impairment charge, non-cash stock-based compensation included in
operating and corporate expenses, net interest expense, loss on debt
extinguishment, loss from discontinued operations, income tax expense (benefit),
equity in net income (loss) of nonconsolidated affiliate and syndication
programming amortization less syndication programming payments.  At
September 30, 2009, the Company’s total consolidated debt outstanding was $363.9
million.


6


The
Company has taken a number of steps to address its liquidity as result of the
decline in its consolidated adjusted EBITDA. As a result of management’s
budgeting process for 2009, taking into consideration the impact that the
further rapid deterioration of the economy could have on its results of
operations, the Company amended its syndicated bank credit facility agreement on
March 16, 2009. Among other things, the amendment requires compliance with a
maximum allowed leverage ratio covenant, calculated as the ratio of consolidated
total debt outstanding to trailing-twelve-month consolidated adjusted EBITDA. In
addition, the amendment imposes certain additional restrictions on liquidity and
operations, including a significantly higher interest rate on outstanding
principal and a sweep of 75% of quarterly excess cash flow, as defined in the
amendment, to repay principal on the outstanding consolidated debt.
 In order
to maintain compliance with the maximum allowed leverage ratio covenant, the
Company will need to achieve certain quarterly, trailing-twelve-month
consolidated adjusted EBITDA targets. The Company believes that, as a result of
the cost-saving measures and the amendment of the syndicated bank credit
facility agreement discussed above, the Company will be able to achieve the
trailing-twelve-month consolidated adjusted EBITDA targets under its amended
syndicated bank credit facility agreement, and, therefore, the Company believes
that it will be able to maintain compliance with the maximum allowed leverage
ratio covenant for at least the next twelve months. Under the amended syndicated
bank credit facility agreement, the debt to trailing-twelve-month consolidated
adjusted EBITDA ratio is required to be below 6.75 at the end of the fourth
quarter of 2009, below 6.50 at the end of the first two quarters of 2010 and
below 6.25 at the end of the third quarter of 2010.


The
Company has also implemented significant cost-saving measures, including
reductions in personnel, executive bonuses, employee benefits, general corporate
expense and capital expenditures in the fourth quarter of 2008, and reductions
in salary expense, promotional expense, bonuses, general corporate expense and
capital expenditures in the first quarter of 2009. The Company currently
estimates that these cost-saving measures have resulted in an expense reduction
of approximately $14 million for the nine-month period ended September 30,
2009.  The Company currently anticipates that these cost-saving
measures will result in additional expense reductions of approximately $6
million during the fourth quarter of 2009. Through the Company’s ongoing efforts
to improve its profitability and cash flows, the Company is continuing to review
its business for areas of possible additional improvement, greater efficiency
and further cost reductions.





While the
Company has had a history of operating losses in some periods and operating
income in other periods, the Company also has a history of generating
significant positive cash flows from its operations. The Company reported a net
loss of $15.6 million and had positive cash flow from operations of $10.2
million for the nine-month period ended September 30, 2009. Additionally, as of
September 30, 2009, the Company had a cash balance of $20.8 million, debt
outstanding under the syndicated bank credit facility of $361.9 million, other
debt of $2.0 million and an accumulated deficit of $837.7 million. The Company
expects to fund its working capital requirements, capital expenditures and
payments of principal and interest on outstanding indebtedness, with cash on
hand, and cash flows from operations. The Company currently anticipates that
funds generated from operations, including cost-saving measures the Company has
taken, and available borrowings under its syndicated bank credit facility will
be sufficient to meet the Company’s anticipated cash requirements for at least
the next twelve months.








2.
THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES





Related
Party





Univision
currently owns approximately 10% of the Company’s common stock on a
fully-converted basis based on public filings made by Univision. In connection
with Univision’s merger with Hispanic Broadcasting Corporation (“HBC”) in
September 2003, Univision entered into an agreement with the U.S. Department of
Justice (“DOJ”), pursuant to which Univision agreed, among other things, to
ensure that its percentage ownership of the Company would not exceed 15% by
March 26, 2006 and would not exceed 10% by March 26, 2009.





In
February 2008, the Company repurchased 1.5 million shares of Class U common
stock held by Univision for $10.4 million.  In May 2009, the Company
repurchased an additional 0.9 million shares of Class A common stock held by
Univision for $0.5 million.





The
Company’s Class U common stock held by Univision has limited voting rights and
does not include the right to elect directors. However, as the holder of all of
the Company’s issued and outstanding Class U common stock, Univision currently
has the right to approve any merger, consolidation or other business combination
involving the Company, any dissolution of the Company and any assignment of the
Federal Communications Commission, or FCC, licenses for any of the Company’s
Univision-affiliated television stations. Each share of Class U common stock is
automatically convertible into one share of the Company’s Class A common stock
(subject to adjustment for stock splits, dividends or combinations) in
connection with any transfer to a third party that is not an affiliate of
Univision.


7


Univision
acts as the Company’s exclusive sales representative for the sale of all
national advertising aired on Univision-affiliate television stations. During
the three-month periods ended September 30, 2009 and 2008, the amount paid by
the Company to Univision in this capacity was $1.7 million and $2.5 million,
respectively.  During the nine-month periods ended September 30, 2009
and 2008, the amount paid by the Company to Univision in this capacity was $4.8
million and $7.1 million, respectively.
 
 In August
2008, the Company entered into an agreement with Univision pursuant to which it
granted Univision the right to negotiate the terms of agreements providing for
the carriage of the Company’s Univision- and TeleFutura-affiliated television
station signals by cable, satellite and internet-based television service
providers. The agreement also provides terms relating to compensation to be paid
to the Company with respect to agreements that are entered into for the carriage
of its Univision- and TeleFutura-affiliated television station
signals.  As of September 30, 2009, the amount due to the Company from
Univision was $4.8 million related to the agreements for the carriage of its
Univision and TeleFutura-affiliated television station
signals.




Stock-Based
Compensation





The
Company measures all stock-based awards using a fair value method and recognizes
the related stock-based compensation expense in the consolidated financial
statements over the requisite service period.  As stock-based
compensation expense recognized in the Company’s consolidated financial
statements is based on awards ultimately expected to vest, it has been reduced
for estimated forfeitures.





Stock-based
compensation expense related to grants of stock options and restricted stock
units was $0.7 million and $0.8 million for the three-month periods ended
September 30, 2009 and 2008, respectively. Stock-based compensation expense
related to grants of stock options and restricted stock units was $2.2 million
and $2.2 million for the nine-month periods ended September 30, 2009 and 2008,
respectively.





Stock
Options





Stock-based
compensation expense related to stock options is based on the fair value on the
date of grant using the Black-Scholes option pricing model and is amortized over
the vesting period, generally between 1 to 3 years.





The fair
value of each stock option granted was estimated using the following
weighted-average assumptions:





Nine-Month
      PeriodEnded
      September 30,2009Fair
      value of options granted
            
            $
            1.20Expected
      volatility
            
            
            80
            %Risk-free
      interest rate
            
            
            2.9
            %Expected
      lives
            
            7.0
      yearsDividend
      rate
            
            
            ―





As of
September 30, 2009, there was approximately $2.7 million of total unrecognized
compensation expense related to grants of stock options that is expected to be
recognized over a weighted-average period of 1.2 years.





Restricted
Stock Units





Stock-based
compensation expense related to restricted stock units is based on the fair
value of the Company’s stock price on the date of grant and is amortized over
the vesting period, generally between 1 to 4 years.





As of
September 30, 2009, there was approximately $1.9 million of total unrecognized
compensation expense related to grants of restricted stock units that is
expected to be recognized over a weighted-average period of 0.9
years.


8


Income
(Loss) Per Share





The
following table illustrates the reconciliation of the basic and diluted income
per share computations required by ASC 260-10, “Earnings Per Share” (in
thousands, except per share and per share data):


Three-Month
      Period
              
              
              Nine-Month
      PeriodEnded
      September 30,
              
              
              Ended
      September 30,2009
              
              
              2008
              
              
              2009
              
              
              2008Basic
      earnings per share:Numerator:Income
      (loss) from continuing operations
              
              $
              673
              
              
              $
              (354,491
              )
              
              $
              (15,648
              )
              
              $
              (349,881
              )Loss
      from discontinued operations
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,573
              )Net
      income (loss) applicable to common stockholders
              
              $
              673
              
              
              $
              (354,491
              )
              
              $
              (15,648
              )
              
              $
              (351,454
              )Denominator:Weighted
      average common shares outstanding
              
              
              83,683,908
              
              
              
              89,130,413
              
              
              
              84,049,423
              
              
              
              92,029,671Per
      share:Net
      income (loss) per share from continuing operations
              
              $
              0.01
              
              
              $
              (3.98
              )
              
              $
              (0.19
              )
              
              $
              (3.80
              )Net
      loss per share from discontinued operations
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (0.02
              )Net
      income (loss) per share applicable to common stockholders
              
              $
              0.01
              
              
              $
              (3.98
              )
              
              $
              (0.19
              )
              
              $
              (3.82
              )Diluted
      earnings per share:Numerator:Income
      (loss) from continuing operations
              
              $
              673
              
              
              $
              (354,491
              )
              
              $
              (15,648
              )
              
              $
              (349,881
              )Loss
      from discontinued operations
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (1,573
              )Net
      income (loss) applicable to common stockholders
              
              $
              673
              
              
              $
              (354,491
              )
              
              $
              (15,648
              )
              
              $
              (351,454
              )Denominator:Weighted
      average common shares outstanding
              
              
              83,683,908
              
              
              
              89,130,413
              
              
              
              84,049,423
              
              
              
              92,029,671Dilutive
      securities:Stock
      options, restricted stock unitsand
      employee stock purchase plan
              
              
              251,411
              
              
              
              -
              
              
              
              -
              
              
              
              -Diluted
      shares outstanding
              
              
              83,935,319
              
              
              
              89,130,413
              
              
              
              84,049,423
              
              
              
              92,029,671Per
      share:Net
      income (loss) per share from continuing operations
              
              $
              0.01
              
              
              $
              (3.98
              )
              
              $
              (0.19
              )
              
              $
              (3.80
              )Net
      loss per share from discontinued operations
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (0.02
              )Net
      income (loss) per share applicable to common stockholders
              
              $
              0.01
              
              
              $
              (3.98
              )
              
              $
              (0.19
              )
              
              $
              (3.82
              )


Basic
income (loss) per share is computed as net loss divided by the weighted average
number of shares outstanding for the period. Diluted income (loss) per share
reflects the potential dilution, if any, that could occur from shares issuable
through stock options, restricted stock units and convertible
securities.





For the
three-month period ended September 31, 2009, a total of 11,311,649 shares of
dilutive securities were not included in the computation of diluted income per
share because the exercise prices of the dilutive securities were greater than
the average market price of the Company's common stock.  For the
nine-month period ended September 30, 2009, all dilutive securities have been
excluded as their inclusion would have had an antidilutive effect on loss per
share. The securities whose conversion would result in an incremental number of
shares that would be included in determining the weighted average shares
outstanding for diluted earnings per share if their effect was not antidilutive
was 158,546 equivalent shares of dilutive securities for the nine-month period
ended September 30, 2009.





For the
three- and nine-month periods ended September 30, 2008, all dilutive securities
have been excluded as their inclusion would have had an antidilutive effect on
loss per share. The securities whose conversion would result in an incremental
number of shares that would be included in determining the weighted average
shares outstanding for diluted earnings per share if their effect was not
antidilutive was 99,629 and 244,376 equivalent shares of dilutive securities for
the three- and nine-month periods ended September 30, 2008,
respectively.  9


Acquisition
of Assets





In April
2009, the Company acquired the assets of television station KREN-TV in the Reno,
Nevada market for approximately $4.3 million.  The Company reduced the
carrying value of the assets of television station KREN-TV to its fair value of
$1.6 million by recording a carrying value adjustment of $2.7
million.  This charge is included in the consolidated statements of
operations for continuing operations.





The
following is a summary of the carrying value of the Company’s acquisition of the
net assets of television station KREN-TV in Reno, Nevada (in
millions):


Property
      and equipment
            
            $
            1.4Intangible
      assets subject to amortization - Favorable lease
            
            
            0.1Intangible
      assets not subject to amortization - FCC license
            
            
            0.11.6





In
accordance with ASC 805, “Business Combinations”, the Company evaluated the
transferred set of activities, assets, inputs, outputs and processes in this
acquisition and determined that the acquisition did not constitute a
business.





Assets
Held for Sale and Discontinued Operations





In May
2008, the Company sold the outdoor advertising business to Lamar Advertising Co.
for $101.5 million.  The Company reviewed the portfolio of media
properties and decided to sell its outdoor advertising business as it was a
non-core business where the opportunity to grow to scale was
limited.  The Company decided that the net proceeds of the sale would
improve financial flexibility, including debt and stock
repurchases.





As a
result of the disposition, the Company no longer has outdoor advertising
operations. Accordingly, the financial statements reflect the outdoor segment
revenue and expenses as discontinued operations.





Summarized
financial information in the consolidated statements of operations for the
discontinued outdoor operations is as follows (in thousands):


Nine-Month
      PeriodEnded
      September 30,2008Net
      revenue
            
            $
            13,730Loss
      before income taxes
            
            
            (2,177
            )Income
      tax benefit
            
            
            604Loss
      from discontinued operations, net of tax
            
            $
            (1,573
            )





In
presenting discontinued operations, corporate overhead expenses have not been
allocated consistent with historical outdoor segment presentation.





Syndicated
Bank Credit Facility





In
September 2005, the Company entered into a syndicated bank credit facility with
a $650 million senior secured syndicated bank credit facility, consisting of a 7
1⁄2 year $500 million term loan and a 6 1⁄2 year $150 million revolving facility.
The term loan under the syndicated bank credit facility has been drawn in full,
the proceeds of which were used (i) to refinance $250 million outstanding
under the former syndicated bank credit facility, (ii) to complete a tender
offer for the previously outstanding $225 million senior subordinated notes, and
(iii) for general corporate purposes.  The term loan matures in
2013 and the revolving facility expires in 2012. The Company’s ability to make
additional borrowings under the syndicated bank credit facility is subject to
compliance with certain financial covenants, including financial ratios, and
other conditions set forth in the syndicated bank credit facility.


10


On March
16, 2009, the Company entered into an amendment to the syndicated bank credit
facility agreement. Pursuant
to this amendment, among other things:





•
            The
      interest that the Company pays under the credit facility
      increased.  Both the revolver and term loan borrowings under the
      amendment bear interest at a variable interest rate based on either LIBOR
      or a base rate, in either case plus an applicable margin that varies
      depending upon the leverage ratio. Borrowings under both the revolver and
      term loan bear interest at LIBOR plus a margin of 5.25% when the leverage
      ratio is greater than or equal to 5.0.  When the leverage ratio
      is less than 5.0 but greater than or equal to 4.0, borrowings under both
      the revolver and term loan will bear interest at LIBOR plus a margin of
      4.25%. When the leverage ratio is less than 4.0, borrowings under both the
      revolver and term loan will bear interest at LIBOR plus a margin of
      3.25%.  The term loan bears interest at LIBOR plus a margin of
      5.25%, for a total interest rate of 5.54% at September 30, 2009. As of
      September 30, 2009, $361.9 million of the term loan was
      outstanding.





•
            The
      total amount of the revolver facility was reduced from $150 million to $50
      million. Borrowings under the revolver are restricted to $5 million in the
      aggregate during any rolling 30-day period when the leverage ratio is less
      than 1.0 of the maximum allowable ratio during the applicable period. New
      conditions have been added for loans under the revolver facility greater
      than $5 million. The revolving facility bears interest at LIBOR plus a
      margin ranging from 3.25% to 5.25% based on leverage covenants. As of
      September 30, 2009, the Company had approximately $1 million in
      outstanding letters of credit and $49 million was available under the
      revolving facility for future borrowings. In addition, the Company pays a
      quarterly unused commitment fee ranging from 0.25% to 0.50% per annum,
      depending on the level of facility
used.





•
            There
      are more stringent financial covenants relating to maximum allowed
      leverage ratio, maximum capital expenditures and fixed charge coverage
      ratio. Beginning March 16, 2009 through December 31, 2009, the
      maximum allowed leverage ratio, or the ratio of consolidated total debt to
      trailing-twelve-month consolidated adjusted EBITDA, is 6.75. The maximum
      allowed leverage ratio decreases to 6.50 in the first quarter of 2010. On
      September 30, 2010 the maximum allowed leverage ratio decreases to
      6.25 and on December 31, 2010 the maximum allowed leverage ratio
      decreases to 6.0. Beginning March 31, 2011 and through the term of
      the agreement, the maximum allowed leverage ratio is 5.50. The actual
      leverage ratio was 6.7 to 1 as of September 30,
      2009.  Therefore, the Company was in compliance with this
      covenant as of this date.  From March 31, 2009, through the
      term of the agreement, the minimum required fixed charge coverage ratio is
      1.15.





•
            There
      is a mandatory prepayment clause for 100% of the proceeds of certain asset
      dispositions, regardless of the leverage ratio.  In addition, if
      the Company has excess cash flow, as defined in the syndicated bank credit
      facility, 75% of such excess cash flow must be used to reduce the
      outstanding loan balance on a quarterly
basis.





•
            Beginning
      March 31, 2009, the senior leverage ratio and net leverage ratio were
      eliminated.





•
            Capital
      expenditures may not exceed $10 million in each of 2009 and
      2010.





•
            The
      Company is restricted from making acquisitions and investments when the
      leverage ratio is greater than 4.0, with an exception to permit the
      completion of the acquisition of television assets serving the Reno,
      Nevada market.





•
            The
      Company is restricted from making future repurchases of shares of common
      stock, except under a limited circumstance, which the Company
      utilized in May 2009 and may utilize again in the
      future.





•
            The
      Company is restricted from making any further debt repurchases in the
      secondary market.





The
amendment also contains additional covenants, representations and provisions
that are usual and customary for credit facilities of this type.  All
other provisions of the credit facility agreement, as amended, remain in full
force and effect unless expressly amended or modified by the
amendment.





At the
time of entering into this amendment, the Company made a prepayment of $40
million to reduce the outstanding amount of the term loans and paid the lenders
an amendment fee.





The
Company recorded a loss on debt extinguishment of $4.7 million for fees,
unamortized finance costs and interest rate swap agreement termination costs
associated with the amendment to the syndicated bank credit facility during the
nine-month period ended September 30, 2009.


11


The
syndicated bank credit facility is secured by substantially all of the assets,
as well as the pledge of the stock of substantially all of the subsidiaries,
including the special purpose subsidiary formed to hold our FCC licenses. The
syndicated bank credit facility contains customary events of default. If an
event of default occurs and is continuing, the Company might be required to
repay all amounts then outstanding under the syndicated bank credit facility.
Lenders holding more than 50% of the loans and commitments under the syndicated
bank credit facility may elect to accelerate the maturity of loans upon the
occurrence and during the continuation of an event of default.





The
syndicated bank credit facility contains certain financial covenants relating to
maximum leverage ratio, maximum capital expenditures and minimum fixed charge
coverage ratio. The covenants become increasingly restrictive in the later years
of the syndicated bank credit facility. The syndicated bank credit facility also
requires the Company to maintain FCC licenses for broadcast properties and
contains restrictions on the incurrence of additional debt, the payment of
dividends, the repurchase of shares of the Company’s common stock, the making of
acquisitions and the sale of assets.





The
carrying amount and estimated fair value of our term loan as of September 30,
2009 was $361.9 million and $355.2 million, respectively.  The
estimated fair value of our term loan is based on the quoted market prices for
the same or similar issues or on the current rates offered to the Company for
instruments with similar terms.





Derivative
Instruments





The
Company uses interest rate swap agreements to manage its exposure to the risks
associated with changes in interest rates.  The Company does not enter
into derivative instruments for speculation or trading purposes.  As
of September 30, 2009, the Company had three interest rate swap agreements with
a $206 million aggregate notional amount, with quarterly reductions, that expire
on October 1, 2010, and a fourth interest rate swap agreement with a $155.9
million notional amount, with quarterly increases, that also expires on October
1, 2010.  The three interest rate swap agreements convert a portion of
the variable rate term loan into a fixed rate obligation of 9.71%, which
includes a margin of 5.25%.  The fourth interest rate swap agreement
converts a portion of the variable rate term loan into a fixed rate obligation
of 10.31%, which includes a margin of 5.25%.  It is expected that the
term loan amount will not exceed the notional amount of the four interest rate
swap agreements.  As of September 30, 2009 and 2008, these
interest rate swap agreements were not designated for hedge accounting
treatment, and as a result, changes in their fair values are reflected in
earnings.





For the
three-month period ended September 30, 2009, the Company recognized a decrease
of $1.3 million in interest expense related to the increase in fair value of the
interest rate swap agreements.  For the three-month period ended
September 30, 2008, the Company recognized an increase of $0.4 million in
interest expense related to the decrease in fair value of the interest rate swap
agreements.





For the
nine-month period ended September 30, 2009, the Company recognized a decrease of
$3.8 million in interest expense related to the increase in fair value of the
interest rate swap agreements.  For the nine-month period ended
September 30, 2008, the Company recognized an increase of $3.6 million in
interest expense related to the decrease in fair value of the interest rate swap
agreements.





The fair
value of the interest rate swap agreements at each balance sheet date was as
follows (in millions):




September
      30, 2009
            
            
            December
      31, 2008Derivatives Not Designated As Hedging
      Instruments
            Balance Sheet Location
            
            Fair Value
            
            
            Fair ValueInterest
      rate swap agreements
            Accounts
      payable, accrued expenses and other liabilities
            
            $
            19.4
            
            
            $
            23.2





The
following table presents the effect of the interest rate swap agreements on our
consolidated statements of operations for the three-and nine month periods ended
September 30, 2009 and 2008 (in millions):




Three-Month
      Period
            
            
            Nine-Month
      PeriodDerivatives Not Designated As
      Hedging
            Location
      of
            
            Ended September 30,
            
            
            Ended September 30,Instruments
            Income (Loss)
            
            2009
            
            
            2008
            
            
            2009
            
            
            2008Interest
      rate swap agreements
            Interest
      expense
            
            $
            1.3
            
            
            $
            (0.4
            )
            
            $
            3.8
            
            
            $
            (3.6
            )


12


Fair
Value Measurements


On January 1,
2008, the Company adopted ASC 820, “Fair Value Measurements and Disclosures”,
which defines and establishes a framework for measuring fair value and expands
disclosures about fair value measurements. In accordance with ASC 820, the
Company has categorized its financial assets and liabilities, based on the
priority of the inputs to the valuation technique, into a three-level fair value
hierarchy as set forth below.





Level 1 – Financial assets
and liabilities whose values are based on unadjusted quoted prices for identical
assets or liabilities in an active market that the company has the ability to
access at the measurement date.





Level 2 – Financial assets
and liabilities whose values are based on quoted prices for similar attributes
in active markets; quoted prices in markets where trading occurs infrequently;
and inputs other than quoted prices that are observable, either directly or
indirectly, for substantially the full term of the asset or
liability.





Level 3 – Financial assets
and liabilities whose values are based on prices or valuation techniques that
require inputs that are both unobservable and significant to the overall fair
value measurement.





If the
inputs used to measure the financial instruments fall within different levels of
the hierarchy, the categorization is based on the lowest level input that is
significant to the fair value measurement of the instrument.





The
following table presents the financial liabilities measured at fair value on a
recurring basis, based on the fair value hierarchy as of September 30, 2009
and December 31, 2008 (in millions):


September 30, 2009
            
            
            December 31, 2008Liabilities
            
            Level 2
            
            
            Level 2Interest
      rate swap agreements
            
            $
            19.4
            
            
            $
            23.2





Interest
Rate Swap Agreements





The fair
values of the interest rate swap agreements represent the present value of
expected future cash flows estimated to be received from or paid to a
marketplace participant in settlement of these instruments. They are valued
using inputs including broker/dealer quotes, adjusted for non-performance risk,
based on valuation models that incorporate observable market information and are
classified within Level 2 of the fair value hierarchy.





Recent
Accounting Pronouncements





In August
2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-05,
“Measuring Liabilities at Fair Value” (“ASU 2009-05”). ASU 2009-05 clarifies ASC
820, “Fair Value Measurements and Disclosures”.  ASU 2009-05 provides
clarification that in circumstances in which a quoted price in an active market
for the identical liability is not available, a reporting entity is required to
measure fair value using one or more of the following methods: 1) a valuation
technique that uses a) the quoted price of the identical liability when traded
as an asset or b) quoted prices for similar liabilities or similar liabilities
when traded as assets and/or 2) a valuation technique that is consistent with
the principles of ASC 820. ASU 2009-05 also clarifies that when estimating the
fair value of a liability, a reporting entity is not required to adjust to
include inputs relating to the existence of transfer restrictions on that
liability. This standard is effective beginning in the fourth quarter 2009. The
Company is currently evaluating the impact of this standard on the consolidated
financial statements.





In
October 2009, the FASB issued ASU No. 2009-13, “Multiple-Deliverable Revenue
Arrangements” (“ASU 2009-13”). ASU 2009-13 addresses how to determine whether an
arrangement involving multiple deliverables contains more than one unit of
accounting and how arrangement consideration shall be measured and allocated to
the separate units of accounting in the arrangement.  ASU 2009-13 is
effective for revenue arrangements entered into or materially modified in fiscal
years beginning on or after June 15, 2010. The Company is currently evaluating
the impact of this standard on the consolidated financial
statements.





In June
2009, the FASB issued an amendment to ASC 860, “Transfers and Servicing”. The
amendment eliminates the concept of a qualifying special-purpose entity
(“QSPE”), therefore requiring these entities to be evaluated under the
accounting guidance for consolidation of variable interest entities (“VIE”).
Other changes include additional considerations when determining if sale
accounting is appropriate, as well as enhanced disclosures
requirements.  This standard is effective January 1, 2010. The Company
is currently evaluating the impact of this standard on the consolidated
financial statements.


13


In June 2009,
the FASB issued an amendment to ASC 810, “Consolidation”. The amendment
eliminates the scope exception for QSPEs and requires an entity to reconsider
its previous consolidation conclusions reached under the VIE consolidation
model, including (i) whether an entity is a VIE, (ii) whether the
enterprise is the VIE’s primary beneficiary, and (iii) the required
financial statement disclosures. The new standard can be applied as of the
effective date, with a cumulative-effect adjustment to retained earnings
recognized on that date, or retrospectively, with a cumulative-effect adjustment
to retained earnings recognized as of the beginning of the first year adjusted.
This standard is effective January 1, 2010. The Company is currently evaluating
the impact of this standard on the consolidated financial
statements.








3.
SEGMENT INFORMATION





The
Company operates in two reportable segments: television broadcasting and radio
broadcasting.





Television
Broadcasting





The
Company owns and/or operates 53 primary television stations located primarily in
California, Colorado, Connecticut, Florida, Massachusetts, Nevada, New Mexico,
Texas and Washington, D.C.





Radio
Broadcasting





The
Company owns and operates 48 radio stations (37 FM and 11 AM) located 
primarily in Arizona, California, Colorado, Florida, Nevada, New Mexico and
Texas.





Separate
financial data for each of the Company’s operating segments is provided below.
Segment operating profit (loss) is defined as operating profit (loss) before
corporate expenses and impairment charge. There were no significant sources of
revenue generated outside the United States during the three- and nine-month
periods ended September 30, 2009 and 2008. The Company evaluates the
performance of its operating segments based on the following (in
thousands):


14




Three-Month
      Period
              
              
              %
      Change
              
              
              Nine-Month
      Period
              
              
              %
      ChangeEnded
      September 30,
              
              
              2009
      to
              
              
              Ended
      September 30,
              
              
              2009
      to2009
              
              
              2008
              
              
              2008
              
              
              2009
              
              
              2008
              
              
              2008Net
      RevenueTelevision
              
              $
              32,019
              
              
              $
              37,479
              
              
              
              (15
              )%
              
              $
              92,037
              
              
              $
              112,528
              
              
              
              (18
              )%Radio
              
              
              18,735
              
              
              
              23,509
              
              
              
              (20
              )%
              
              
              49,128
              
              
              
              67,045
              
              
              
              (27
              )%Consolidated
              
              
              50,754
              
              
              
              60,988
              
              
              
              (17
              )%
              
              
              141,165
              
              
              
              179,573
              
              
              
              (21
              )%Direct
      operating expensesTelevision
              
              
              13,022
              
              
              
              16,421
              
              
              
              (21
              )%
              
              
              40,202
              
              
              
              48,535
              
              
              
              (17
              )%Radio
              
              
              8,008
              
              
              
              9,162
              
              
              
              (13
              )%
              
              
              23,488
              
              
              
              27,723
              
              
              
              (15
              )%Consolidated
              
              
              21,030
              
              
              
              25,583
              
              
              
              (18
              )%
              
              
              63,690
              
              
              
              76,258
              
              
              
              (16
              )%Selling,
      general and administrative expensesTelevision
              
              
              4,579
              
              
              
              5,487
              
              
              
              (17
              )%
              
              
              14,861
              
              
              
              16,598
              
              
              
              (10
              )%Radio
              
              
              4,963
              
              
              
              5,907
              
              
              
              (16
              )%
              
              
              13,480
              
              
              
              16,428
              
              
              
              (18
              )%Consolidated
              
              
              9,542
              
              
              
              11,394
              
              
              
              (16
              )%
              
              
              28,341
              
              
              
              33,026
              
              
              
              (14
              )%Depreciation
      and amortizationTelevision
              
              
              3,897
              
              
              
              4,527
              
              
              
              (14
              )%
              
              
              11,764
              
              
              
              13,104
              
              
              
              (10
              )%Radio
              
              
              1,375
              
              
              
              1,471
              
              
              
              (7
              )%
              
              
              4,129
              
              
              
              4,081
              
              
              
              1
              %Consolidated
              
              
              5,272
              
              
              
              5,998
              
              
              
              (12
              )%
              
              
              15,893
              
              
              
              17,185
              
              
              
              (8
              )%Segment
      operating profitTelevision
              
              
              10,521
              
              
              
              11,044
              
              
              
              (5
              )%
              
              
              25,210
              
              
              
              34,291
              
              
              
              (26
              )%Radio
              
              
              4,389
              
              
              
              6,969
              
              
              
              (37
              )%
              
              
              8,031
              
              
              
              18,813
              
              
              
              (57
              )%Consolidated
              
              
              14,910
              
              
              
              18,013
              
              
              
              (17
              )%
              
              
              33,241
              
              
              
              53,104
              
              
              
              (37
              )%Corporate
      expenses
              
              
              3,351
              
              
              
              3,772
              
              
              
              (11
              )%
              
              
              10,602
              
              
              
              12,703
              
              
              
              (17
              )%Impairment
      charge
              
              
              -
              
              
              
              440,020
              
              
              
              *
              
              
              
              2,720
              
              
              
              440,020
              
              
              
              (99
              )%Operating
      income
              
              
              11,559
              
              
              
              (425,779
              )
              
              
              *
              
              
              
              19,919
              
              
              
              (399,619
              )
              
              
              *Interest
      expense
              
              
              (8,227
              )
              
              
              (8,172
              )
              
              
              1
              %
              
              
              (21,762
              )
              
              
              (27,595
              )
              
              
              (21
              )%Interest
      income
              
              
              70
              
              
              
              622
              
              
              
              (89
              )%
              
              
              388
              
              
              
              1,339
              
              
              
              (71
              )%Loss
      on debt extinguishment
              
              
              -
              
              
              
              -
              
              
              
              *
              
              
              
              (4,716
              )
              
              
              -
              
              
              
              *Income
      (loss) before income taxes from continuing operations
              
              $
              3,402
              
              
              $
              (433,329
              )
              
              
              *
              
              
              $
              (6,171
              )
              
              $
              (425,875
              )
              
              
              (99
              )%Capital
      expendituresTelevision
              
              $
              2,151
              
              
              $
              4,198
              
              
              
              
              
              
              $
              4,667
              
              
              $
              10,709Radio
              
              
              252
              
              
              
              824
              
              
              
              
              
              
              
              628
              
              
              
              2,786Consolidated
              
              $
              2,403
              
              
              $
              5,022
              
              
              
              
              
              
              $
              5,295
              
              
              $
              13,495September
      30,
              
              
              December
      31,Total
      assets
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2009
              
              
              
              2008Television
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              344,959
              
              
              $
              394,287Radio
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              192,025
              
              
              
              196,752Consolidated
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              536,984
              
              
              $
              591,039


*
            Percentage
      not meaningful.


15


4.
LITIGATION





The
Company is subject to various outstanding claims and other legal proceedings
that arose in the ordinary course of business. In the opinion of management, any
liability of the Company that may arise out of or with respect to these matters
will not materially adversely affect the financial position, results of
operations or cash flows of the Company.





5.
SUBSEQUENT EVENTS





In
accordance with ASC 855, “Subsequent Events”, the Company evaluated all events
or transactions that occurred after September 30, 2009 through November 6, 2009,
the date the Company issued its consolidated financial statements, and
determined that none met the definition of a subsequent event for purposes of
recognition or disclosure in the consolidated financial statements for the
period ended September 30, 2009.








ITEM 2.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





Overview





We are a
diversified Spanish-language media company with a unique portfolio of television
and radio assets that reach Hispanic consumers across the United States, as well
as the border markets of Mexico. We operate in two reportable segments:
television broadcasting and radio broadcasting. Our net revenue for the
three-month period ended September 30, 2009, was $50.8 million. Of that
amount, revenue generated by our television segment accounted for 63% and
revenue generated by our radio segment accounted for 37%.





As of the
date of filing this report, we own and/or operate 53 primary television stations
located primarily in California, Colorado, Connecticut, Florida, Massachusetts,
Nevada, New Mexico, Texas and Washington, D.C. We own and operate 48 radio
stations (37 FM and 11 AM) located primarily in Arizona, California, Colorado,
Florida, Nevada, New Mexico and Texas.





We
generate revenue from sales of national and local advertising time on television
and radio stations. Advertising rates are, in large part, based on each medium’s
ability to attract audiences in demographic groups targeted by advertisers. We
recognize advertising revenue when commercials are broadcast. We do not obtain
long-term commitments from our advertisers and, consequently, they may cancel,
reduce or postpone orders without penalties. We pay commissions to agencies for
local, regional and national advertising. For contracts directly with agencies,
we record net revenue from these agencies. Seasonal revenue fluctuations are
common in the broadcasting industry and are due primarily to variations in
advertising expenditures by both local and national advertisers.





Our
primary expenses are employee compensation, including commissions paid to our
sales staff and amounts paid to our national representative firms, as well as
expenses for marketing, promotion and selling, technical, local programming,
engineering, and general and administrative. Our local programming costs for
television consist primarily of costs related to producing a local newscast in
most of our markets.





The
comparability of our results between 2009 and 2008 is affected by acquisitions
and dispositions in those periods. In those years, we primarily acquired new
media properties in markets where we already owned existing media properties.
While new media properties contribute to the financial results of their markets,
we do not attempt to measure their effect as they typically are integrated into
existing operations.





Highlights





During
the third quarter of 2009, we continued to face a significant advertising
downturn, both in television and radio, primarily as a result of the ongoing
global financial crisis and the recession.  Nevertheless, our audience
shares remained strong in the nation’s most densely populated Hispanic
markets.





Net
revenue for our television segment decreased to $32.0 million in the third
quarter of 2009, from $37.5 million in the third quarter of
2008.  This decrease of $5.5 million, or 15%, in net revenue was
primarily due to a decrease in local and national advertising rates, which in
turn was primarily due to the continuing weak economy. On the other hand, we
generated $2.4 million of revenue from retransmission consent agreements, or
retransmission consent revenue, that have been entered into for the carriage of
our television station signals by cable, satellite and internet-based television
service providers. See “Consolidated Operations – Net Revenue”
below.


16


Net
revenue for our radio segment decreased to $18.7 million in the third quarter of
2009, from $23.5 million in the third quarter of 2008.  This decrease of
$4.8 million, or 20%, in net revenue was primarily due to a decrease in local
and national advertising sales and advertising rates, which in turn was
primarily due to the continuing weak economy. Nevertheless, we continued to
concentrate our efforts on local sales, which accounted for 75% of total radio
segment sales in the third quarter of 2009.





We
continue to experience solid ratings growth in our radio markets where we
broadcast “José: Nunca Sabes Lo Que Va A Tocar” (“You never know what he’ll
play”), which features a mix of Spanish-language adult contemporary and Mexican
regional hits from the 1970s through the present, as well as our stations that
are broadcasting the “Piolin por la Mañana,” syndicated morning show, one of the
highest-rated Spanish-language radio programs in the country. In January 2009,
we converted one of our Los Angeles radio stations from English-language to
Spanish-language and introduced a new format, “El Gato,” an upbeat and energetic
regional Mexican format, and our ratings for this station have since increased
by 133% year over year for adults 18-34 years of age.





In
response to our previously announced cost-savings measures undertaken in the
fourth quarter of 2008 and the first quarter of 2009, we are benefiting from
reductions in our expenses. We anticipate that these savings will continue at
least for the remainder of 2009. We intend to continue to evaluate the extent
and effectiveness of our cost-saving measures based on changing future economic
conditions and our achieving or not achieving budgeted revenues, and will
consider taking additional measures if and as circumstances
warrant.





Acquisition
of Assets





In April
2009, we acquired the assets of television station KREN-TV in the Reno, Nevada
market for approximately $4.3 million.  We reduced the carrying value
of the assets of television station KREN-TV to its fair value of $1.6 million by
recording a carrying value adjustment of $2.7 million.  This charge is
included in our consolidated statements of operations for continuing
operations.





In
accordance with ASC 805, “Business Combinations”, we evaluated the transferred
set of activities, assets, inputs, outputs and processes in this acquisition and
determined that the acquisition did not constitute a business.





Relationship
with Univision





Based on
our review of public filings made by Univision, we believe that Univision
currently owns approximately 10% of our common stock on a fully-converted basis.
In connection with its merger with Hispanic Broadcasting Corporation in
September 2003, Univision entered into an agreement with the U.S. Department of
Justice, or DOJ, pursuant to which Univision agreed, among other things, to
ensure that its percentage ownership of our company would not exceed 15% by
March 26, 2006 and would not exceed 10% by March 26, 2009.





In
February 2008, we repurchased 1.5 million shares of Class U common stock held by
Univision for $10.4 million.  In May 2009, we repurchased an
additional 0.9 million shares of Class A common stock held by Univision for $0.5
million.





Univision
is the holder of all of our issued and outstanding Class U common
stock.  The Class U common stock has limited voting rights and does
not include the right to elect directors. However, as the holder of all of our
issued and outstanding Class U common stock, Univision currently has the right
to approve any merger, consolidation or other business combination involving our
company, any dissolution of our company and any assignment of the Federal
Communications Commission, or FCC, licenses for any of our company’s
Univision-affiliated television stations. Each share of Class U common stock is
automatically convertible into one share of our Class A common stock (subject to
adjustment for stock splits, dividends or combinations) in connection with any
transfer to a third party that is not an affiliate of Univision.





Univision
acts as our exclusive sales representative for the sale of all national
advertising aired on Univision-affiliate television stations. During the
three-month periods ended September 30, 2009 and 2008, the amount we paid to
Univision in this capacity was $1.7 million and $2.5 million,
respectively.  During the nine-month periods ended September 30, 2009
and 2008, the amount we paid to Univision in this capacity was $4.8 million and
$7.1 million, respectively.


17


In August
2008, we entered into an agreement with Univision pursuant to which Univision
has negotiated the terms of retransmission consent agreements providing for the
carriage of our Univision- and TeleFutura-affiliated television station signals
by cable, satellite and internet-based television service providers. The
agreement also provides terms relating to retransmission consent revenue with
respect to agreements that have been entered into for the carriage of our
Univision- and TeleFutura-affiliated television station signals.  As
of September 30, 2009, the amount due to us from Univision was $4.8 million
related to our agreements for the carriage of our Univision and
TeleFutura-affiliated television station signals.







Recent
Accounting Pronouncements





In August
2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-05,
“Measuring Liabilities at Fair Value” (“ASU 2009-05”). ASU 2009-05 clarifies ASC
820, “Fair Value Measurements and Disclosures”.  ASU 2009-05 provides
clarification that in circumstances in which a quoted price in an active market
for the identical liability is not available, a reporting entity is required to
measure fair value using one or more of the following methods: 1) a valuation
technique that uses a) the quoted price of the identical liability when traded
as an asset or b) quoted prices for similar liabilities or similar liabilities
when traded as assets and/or 2) a valuation technique that is consistent with
the principles of ASC 820. ASU 2009-05 also clarifies that when estimating the
fair value of a liability, a reporting entity is not required to adjust to
include inputs relating to the existence of transfer restrictions on that
liability. This standard is effective beginning in the fourth quarter 2009. We
are currently evaluating the impact of this standard on our consolidated
financial statements.





In
October 2009, the FASB issued ASU No. 2009-13, “Multiple-Deliverable Revenue
Arrangements” (“ASU 2009-13”). ASU 2009-13 addresses how to determine whether an
arrangement involving multiple deliverables contains more than one unit of
accounting and how arrangement consideration shall be measured and allocated to
the separate units of accounting in the arrangement.  ASU 2009-13 is
effective for revenue arrangements entered into or materially modified in fiscal
years beginning on or after June 15, 2010.  We are currently
evaluating the impact of this standard on our consolidated financial
statements.





In June
2009, the FASB issued an amendment to ASC 860, “Transfers and Servicing”. The
amendment eliminates the concept of a qualifying special-purpose entity
(“QSPE”), therefore requiring these entities to be evaluated under the
accounting guidance for consolidation of variable interest entities (“VIE”).
Other changes include additional considerations when determining if sale
accounting is appropriate, as well as enhanced disclosures
requirements.  This standard is effective January 1, 2010. We are
currently evaluating the impact of this standard on our consolidated financial
statements.





In June
2009, the FASB issued an amendment to ASC 810, “Consolidation”. The amendment
eliminates the scope exception for QSPEs and requires an entity to reconsider
its previous consolidation conclusions reached under the VIE consolidation
model, including (i) whether an entity is a VIE, (ii) whether the
enterprise is the VIE’s primary beneficiary, and (iii) the required
financial statement disclosures. The new standard can be applied as of the
effective date, with a cumulative-effect adjustment to retained earnings
recognized on that date, or retrospectively, with a cumulative-effect adjustment
to retained earnings recognized as of the beginning of the first year adjusted.
This standard is effective January 1, 2010. We are currently evaluating the
impact of this standard on our consolidated financial statements.




Three-
and Nine-Month Periods Ended September 30, 2009 and 2008
 
 The
following table sets forth selected data from our operating results for the
three- and nine-month periods ended September 30, 2009 and 2008 (in
thousands):


18





Three-Month
      Period
            
            
            
            
            
            Nine-Month
      PeriodEnded
      September 30,
            
            
            %
            
            
            Ended
      September 30,
            
            
            %2009
            
            
            2008
            
            
            Change
            
            
            2009
            
            
            2008
            
            
            ChangeStatements
      of Operations Data:Net
      revenue
            
            $
            50,754
            
            
            $
            60,988
            
            
            
            (17
            )%
            
            $
            141,165
            
            
            $
            179,573
            
            
            
            (21
            )%Direct
      operating expenses
            
            
            21,030
            
            
            
            25,583
            
            
            
            (18
            )%
            
            
            63,690
            
            
            
            76,258
            
            
            
            (16
            )%Selling,
      general and administrative expenses
            
            
            9,542
            
            
            
            11,394
            
            
            
            (16
            )%
            
            
            28,341
            
            
            
            33,026
            
            
            
            (14
            )%Corporate
      expenses
            
            
            3,351
            
            
            
            3,772
            
            
            
            (11
            )%
            
            
            10,602
            
            
            
            12,703
            
            
            
            (17
            )%Depreciation
      and amortization
            
            
            5,272
            
            
            
            5,998
            
            
            
            (12
            )%
            
            
            15,893
            
            
            
            17,185
            
            
            
            (8
            )%Impairment
      charge
            
            
            -
            
            
            
            440,020
            
            
            
            *
            
            
            
            2,720
            
            
            
            440,020
            
            
            
            (99
            )%39,195
            
            
            
            486,767
            
            
            
            (92
            )%
            
            
            121,246
            
            
            
            579,192
            
            
            
            (79
            )%Operating
      income (loss)
            
            
            11,559
            
            
            
            (425,779
            )
            
            
            *
            
            
            
            19,919
            
            
            
            (399,619
            )
            
            
            *Interest
      expense
            
            
            (8,227
            )
            
            
            (8,172
            )
            
            
            1
            %
            
            
            (21,762
            )
            
            
            (27,595
            )
            
            
            (21
            )%Interest
      income
            
            
            70
            
            
            
            622
            
            
            
            (89
            )%
            
            
            388
            
            
            
            1,339
            
            
            
            (71
            )%Loss
      on debt extinguishment
            
            
            -
            
            
            
            -
            
            
            
            *
            
            
            
            (4,716
            )
            
            
            -
            
            
            
            *Income (loss)
      before incometaxes
            
            
            3,402
            
            
            
            (433,329
            )
            
            
            *
            
            
            
            (6,171
            )
            
            
            (425,875
            )
            
            
            (99
            )%Income
      tax (expense) benefit
            
            
            (2,802
            )
            
            
            78,847
            
            
            
            *
            
            
            
            (9,311
            )
            
            
            76,167
            
            
            
            *Income
      (loss) before equity in netloss
      of nonconsolidated affiliateand
      discontinued operations
            
            
            600
            
            
            
            (354,482
            )
            
            
            *
            
            
            
            (15,482
            )
            
            
            (349,708
            )
            
            
            (96
            )%Equity
      in net income (loss) ofnonconsolidate affiliate, net of tax
            
            
            73
            
            
            
            (9
            )
            
            
            *
            
            
            
            (166
            )
            
            
            (173
            )
            
            
            (4
            )%Income
      (loss) from continuing operations
            
            
            673
            
            
            
            (354,491
            )
            
            
            *
            
            
            
            (15,648
            )
            
            
            (349,881
            )
            
            
            (96
            )%Loss
      from discontinued operations
            
            
            -
            
            
            
            -
            
            
            
            *
            
            
            
            -
            
            
            
            (1,573
            )
            
            
            *Net
      income (loss) applicableto
      common stockholders
            
            $
            673
            
            
            $
            (354,491
            )
            
            
            *
            
            
            $
            (15,648
            )
            
            $
            (351,454
            )
            
            
            (96
            )%Other
      Data:Capital
      expenditures
            
            
            2,403
            
            
            
            5,022
            
            
            
            
            
            
            
            5,295
            
            
            
            13,495Consolidated
      adjusted EBITDA(adjusted
      for non-cashstock-based
      compensation) (1)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            40,307
            
            
            
            60,156Net
      cash provided by operating activities
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            10,197
            
            
            
            33,019Net
      cash provided by (used in) investing activities
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (9,093
            )
            
            
            64,804Net
      cash used in financing activities
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (44,574
            )
            
            
            (67,194
            )


*
            Percentage
      not meaningful.





19


(1)
            Consolidated
      adjusted EBITDA means net income (loss) plus loss (gain) on sale of
      assets, depreciation and amortization, non-cash impairment charge,
      non-cash stock-based compensation included in operating and corporate
      expenses,  net interest expense, loss on debt extinguishment,
      loss from discontinued operations, income tax expense (benefit), equity in
      net income (loss) of nonconsolidated affiliate and syndication programming
      amortization less syndication programming payments. We use the term
      consolidated adjusted EBITDA because that measure is defined in our
      syndicated bank credit facility and does not include loss (gain) on sale
      of assets, depreciation and amortization, non-cash impairment charge,
      non-cash stock-based compensation, net interest expense, loss on debt
      extinguishment, loss from discontinued operations, income tax expense
      (benefit), equity in net income (loss) of nonconsolidated affiliate and
      syndication programming amortization and does include syndication
      programming payments.
              
              Since
      our ability to borrow from our syndicated bank credit facility is based on
      a consolidated adjusted EBITDA financial covenant, we believe that it is
      important to disclose consolidated adjusted EBITDA to our investors. Our
      syndicated bank credit facility contains certain financial covenants
      relating to the maximum allowed leverage ratio, maximum capital
      expenditures and minimum fixed charge coverage ratio. The maximum allowed
      leverage ratio, or the ratio of consolidated total debt to
      trailing-twelve-month consolidated adjusted EBITDA, affects our ability to
      borrow from our syndicated bank credit facility. The maximum allowed
      leverage ratio also affects the interest rate charged for revolving loans,
      thus affecting our interest expense. Under our syndicated bank credit
      facility, our maximum allowed leverage ratio may not exceed 6.75 to 1. The
      actual leverage ratio was as follows (in each case as of September 30):
      2009, 6.7 to 1; 2008, 5.7 to 1. Therefore, we were in compliance with this
      covenant at each of those dates. We entered into an amendment to our
      credit facility agreement in March 2009, so we were not subject to the
      same calculations and covenants in prior years. However, for consistency
      of presentation, the foregoing historical ratios assume that our current
      definition had been applicable for all periods presented.
              
              While
      many in the financial community and we consider consolidated adjusted
      EBITDA to be important, it should be considered in addition to, but not as
      a substitute for or superior to, other measures of liquidity and financial
      performance prepared in accordance with accounting principles generally
      accepted in the United States of America, such as cash flows from
      operating activities, operating income and net income.  As
      consolidated adjusted EBITDA excludes non-cash (gain) loss on sale of
      assets, non-cash depreciation and amortization, non-cash impairment
      charge, non-cash stock-based compensation expense, net interest expense,
      loss on debt extinguishment, loss from discontinued operations, income tax
      expense (benefit), equity in net income (loss) of nonconsolidated
      affiliate and syndication programming amortization and includes
      syndication programming payments, consolidated adjusted EBITDA has certain
      limitations because it excludes and includes several important non-cash
      financial line items. Therefore, we consider both non-GAAP and GAAP
      measures when evaluating our business. Consolidated adjusted EBITDA is
      also used to make executive compensation
  decisions.




20


Consolidated
adjusted EBITDA is a non-GAAP measure. The most directly comparable GAAP
financial measure to consolidated adjusted EBITDA is cash flows from operating
activities. A reconciliation of this non-GAAP measure to cash flows from
operating activities follows (in thousands):


Nine-Month
      PeriodEnded
      September 30,2009
              
              
              2008Consolidated
      adjusted EBITDA (1)
              
              $
              40,307
              
              
              $
              60,156Interest
      expense
              
              
              (21,762
              )
              
              
              (27,595
              )Interest
      income
              
              
              388
              
              
              
              1,339Loss
      on debt extinguishment
              
              
              (4,716
              )
              
              
              -Income
      tax (expense) benefit
              
              
              (9,311
              )
              
              
              76,167Amortization
      of syndication contracts
              
              
              (1,689
              )
              
              
              (2,255
              )Payments
      on syndication contracts
              
              
              2,119
              
              
              
              2,135Non-cash
      stock-based compensation included in direct operatingexpenses
              
              
              (489
              )
              
              
              (462
              )Non-cash
      stock-based compensation included in selling, generaland
      administrative expenses
              
              
              (618
              )
              
              
              (579
              )Non-cash
      stock-based compensation included in corporate expenses
              
              
              (1,098
              )
              
              
              (1,409
              )Depreciation
      and amortization
              
              
              (15,893
              )
              
              
              (17,185
              )Impairment
      charge
              
              
              (2,720
              )
              
              
              (440,020
              )Equity
      in net loss of nonconsolidated affiliates
              
              
              (166
              )
              
              
              (173
              )Loss
      from discontinued operations
              
              
              -
              
              
              
              (1,573
              )Net
      loss
              
              
              (15,648
              )
              
              
              (351,454
              )Depreciation
      and amortization
              
              
              15,893
              
              
              
              17,185Impairment
      charge
              
              
              2,720
              
              
              
              440,020Deferred
      income taxes
              
              
              8,534
              
              
              
              (77,537
              )Amortization
      of debt issue costs
              
              
              298
              
              
              
              302Amortization
      of syndication contracts
              
              
              1,689
              
              
              
              2,255Payments
      on syndication contracts
              
              
              (2,119
              )
              
              
              (2,135
              )Equity
      in net loss of nonconsolidated affiliate
              
              
              166
              
              
              
              173Non-cash
      stock-based compensation
              
              
              2,205
              
              
              
              2,450Gain
      on sale of media properties and other assets
              
              
              (102
              )
              
              
              -Non-cash
      expenses related to debt extinguishment
              
              
              945
              
              
              
              -Change
      in fair value of interest rate swap agreements
              
              
              (3,850
              )
              
              
              3,647Changes
      in assets and liabilities, net of effect of acquisitions and
      dispositions:(Increase)
      decrease in accounts receivable
              
              
              (3,100
              )
              
              
              3,648Increase
      in prepaid expenses and other assets
              
              
              (621
              )
              
              
              (100
              )Increase
      (decrease) in accounts payable, accrued expenses and other
      liabilities
              
              
              3,187
              
              
              
              (3,205
              )Effect
      of discontinued operations
              
              
              -
              
              
              
              (2,230
              )Cash
      flows from operating activities
              
              $
              10,197
              
              
              $
              33,019


21


Consolidated
Operations
 
 Net Revenue. Net revenue
decreased to $50.8 million for the three-month period ended September 30, 2009
from $61.0 million for the three-month period ended September 30, 2008, a
decrease of $10.2 million. Of the overall decrease, $5.4 million came from our
television segment and was primarily attributable to a decrease in local and
national advertising rates, which in turn was primarily due to the continuing
weak economy, partially offset by an increase in retransmission consent revenue.
Additionally, $4.8 million of the overall decrease came from our radio segment
and was primarily attributable to a decrease in local and national advertising
rates, which in turn was primarily due to the continuing weak
economy.
 
 Net
revenue decreased to $141.2 million for the nine-month period ended September
30, 2009 from $179.6 million for the nine-month period ended September 30, 2008,
a decrease of $38.4 million. Of the overall decrease, $20.5 million came from
our television segment and was primarily attributable to a decrease in local and
national advertising rates, which in turn was
primarily due to the continuing weak economy, partially offset by an increase in
retransmission consent revenue. Additionally, $17.9 million of the overall
decrease came from our radio segment and was primarily attributable to a
decrease in local and national advertising sales and advertising rates, which in
turn was primarily due to the continuing weak economy.





We
currently anticipate that net revenue will decrease for the remainder of and
full year 2009, due to (i) a continuing challenging advertising environment,
primarily the result of the ongoing global financial crisis and the recession;
and (ii) the absence of significant political revenue in 2009.  We
believe that we will see continued decreases in most advertising groups,
especially automotive (our single largest source of advertising revenue) and
political advertising. We do not know when the general advertising environment
will change.  However, we anticipate that the general advertising
environment will not improve until at least the economy improves.





Direct Operating Expenses.
Direct operating expenses decreased to $21.0 million for the three-month period
ended September 30, 2009 from $25.6 million for the three-month period ended
September 30, 2008, a decrease of $4.6 million.  Of the overall
decrease, $3.4 million came from our television segment and was primarily
attributable to a decrease in national representation fees and other expenses
associated with the decrease in net revenue and a decrease in salary expense due
to reductions of personnel and salary reductions. Additionally, $1.2 million of
the overall decrease came from our radio segment and was primarily attributable
to a decrease in expenses associated with the decrease in net revenue and a
decrease in salary expense due to reductions of personnel and salary reductions.
As a percentage of net revenue, direct operating expenses decreased to 41% for
the three-month period ended September 30, 2009 from 42% for the three-month
period ended September 30, 2008. Direct operating expenses as a percentage of
net revenue decreased because the decrease in direct operating expenses outpaced
the decrease in net revenue.





Direct operating expenses
decreased to $63.7 million for the nine-month period ended September 30, 2009
from $76.3 million for the nine-month period ended September 30, 2008, a
decrease of $12.6 million.  Of the overall decrease, $8.3 million came
from our television segment and was primarily attributable to a decrease in
national representation fees and other expenses associated with the decrease in
net revenue and a decrease in salary expense due to reductions of personnel and
salary reductions. Additionally, $4.3 million of the overall decrease came from
our radio segment and was primarily attributable to a decrease in expenses
associated with the decrease in net revenue and a decrease in salary expense due
to reductions of personnel and salary reductions. As a percentage of net
revenue, direct operating expenses increased to 45% for the nine-month period
ended September 30, 2009 from 42% for the nine-month period ended September 30,
2008. Direct operating expenses as a percentage of net revenue increased because
the decrease in net revenue outpaced the decrease in direct operating
expenses.





We
believe that direct operating expenses will continue to decrease during at least
the remainder of 2009 as a result of the cost-savings measures that we
implemented during the fourth quarter of 2008 and the first quarter of
2009.  However, we also believe that direct operating expenses as a
percentage of net revenue will increase for the full 2009 year because decreases
in revenue will continue to outpace decreases in direct operating
expenses.





Selling, General and Administrative
Expenses. Selling, general and administrative expenses decreased to $9.5
million for the three-month period ended September 30, 2009 from $11.4 million
for the three-month period ended September 30, 2008, a decrease of $1.9 million.
Of the overall decrease, $1.0 million came from our radio segment and was
primarily attributable to decreases in salary expense due to reductions of
personnel and salary reductions and promotional spending. Additionally, $0.9
million of the overall decrease came from our television segment and was
primarily attributable to a decrease in salary expense due to reductions of
personnel and salary reductions and employee benefits. As a percentage of net
revenue, selling, general and administrative expenses remained the same at 19%
for each of the three-month periods ended September 30, 2009 and
2008.


22


Selling,
general and administrative expenses decreased to $28.3 million for the
nine-month period ended September 30, 2009 from $33.0 million for the nine-month
period ended September 30, 2008, a decrease of $4.7 million. Of the overall
decrease, $3.0 million came from our radio segment and was primarily
attributable to decreases in salary expense due to reductions of personnel and
salary reductions and promotional spending. Additionally, $1.7 million of the
overall decrease came from our television segment and was primarily attributable
to a decrease in salary expense due to reductions of personnel and salary
reductions and employee benefits. As a percentage of net revenue, selling,
general and administrative expenses increased to 20% for the nine-month period
ended September 30, 2009 from 18% for the nine-month period ended September 30,
2008. Selling, general and administrative expenses as a percentage of net
revenue increased because the decrease in net revenue outpaced the decrease in
selling, general and administrative expenses.





We
believe that selling, general and administrative expenses will continue to
decrease during at least the remainder of 2009 as a result of the cost-savings
measures that we implemented during the fourth quarter of 2008 and the first
quarter of 2009. However, we also believe that selling, general and
administrative expenses as a percentage of net revenue will increase for the
full 2009 year because decreases in revenue will continue to outpace decreases
in selling, general and administrative expenses.





Corporate Expenses. Corporate
expenses decreased to $3.4 million for the three-month period ended September
30, 2009 from $3.8 million for the three-month period ended September 30, 2008,
a decrease of $0.4 million. The decrease was primarily attributable to the
decrease in salary expense due to salary reductions and a decrease in employee
benefits. As a percentage of net revenue, corporate expenses increased to 7% for
the three-month period ended September 30, 2009 from 6% for the three-month
period ended September 30, 2008. Corporate expenses as a percentage of net
revenue increased because the decrease in net revenue outpaced the decrease in
corporate expenses.





Corporate
expenses decreased to $10.6 million for the nine-month period ended September
30, 2009 from $12.7 million for the nine-month period ended September 30, 2008,
a decrease of $2.1 million. The decrease was primarily attributable to the
elimination of bonuses paid to executive officers, a decrease in salary expense
due to salary reductions and a decrease in employee benefits. As a percentage of
net revenue, corporate expenses increased to 8% for the nine-month period ended
September 30, 2009 from 7% for the nine-month period ended September 30, 2008.
Corporate expenses as a percentage of net revenue increased because the decrease
in net revenue outpaced the decrease in corporate expenses.





We
believe that corporate expenses will continue to decrease during at least the
remainder of 2009 as a result of the cost-savings measures that we implemented
during the fourth quarter of 2008 and the first quarter of 2009. However, we
also believe that corporate expenses as a percentage of net revenue will
continue to increase during the remainder of and full year 2009 because
decreases in revenue will continue to outpace decreases in corporate
expenses.





Depreciation and
Amortization. Depreciation and amortization decreased to $5.3 million for
the three-month period ended September 30, 2009 from $6.0 million for the
three-month period ended September 30, 2008, a decrease of $0.7 million.
Depreciation and amortization decreased to $15.9 million for the nine-month
period ended September 30, 2009 from $17.2 million for the nine-month period
ended September 30, 2008, a decrease of $1.3 million.





Impairment Charge.Continuing
operations includes a carrying value adjustment of $2.7 million from our
television segment for the nine-month period ended September 30, 2009. The
impairment charge of $440 million for the three- and nine-month periods ended
September 30, 2008 was a result of a $54 million impairment of goodwill in our
radio segment, a $332 million impairment of our radio FCC licenses and a $54
million impairment of our television FCC licenses.





Operating Income (loss). As a
result of the above factors, operating income was $11.6 million for the
three-month period ended September 30, 2009, compared to an operating loss of
$425.8 million for the three-month period ended September 30, 2008. As a result
of the above factors, operating income was $19.9 million for the nine-month
period ended September 30, 2009, compared to an operating loss of $399.6 million
for the nine-month period ended September 30, 2008.





Interest Expense. Interest
expense remained the same at $8.2 million for each of the three-month periods
ended September 30, 2009 and 2008.





Interest
expense decreased to $21.8 million for the nine-month period ended September 30,
2009 from $27.6 million for the nine-month period ended September 30, 2008, a
decrease of $5.8 million. The decrease was primarily attributable to the change
in the fair value of our interest rate swap agreements.





Loss on Debt
Extinguishment.  We recorded a loss on debt extinguishment of
$4.7 million for fees, unamortized finance costs and interest rate swap
agreement termination costs associated with the amendment to the syndicated bank
credit facility for the nine-month period ended September 30, 2009.


23





Income Tax Expense.Income
tax expense for the nine-month period ended September 30, 2009 was $9.3 million.
The effective income tax rate was higher than our expected annual tax rate of
approximately 38% for the nine-month period ended September 30, 2009 due to
state income and capital taxes, other permanent differences, changes in the
valuation allowance and deductions attributable to indefinite-lived
intangibles.





As of
September 30, 2009, we believe that our deferred tax assets will not be fully
realized in the future and have provided a valuation allowance against those
deferred tax assets.  In determining our deferred tax assets subject
to a valuation allowance, we excluded certain of the deferred tax liabilities
attributable to indefinite-lived intangibles.





Loss from Discontinued
Operations. We sold our outdoor advertising operations during the second
quarter of 2008.  In accordance with ASC 360-10-45, “Impairment or
Disposal of Long-Lived Assets”, we reported the results of our outdoor
advertising operations in discontinued operations within the consolidated
statements of operations.  The loss from discontinued operations was
$1.6 million for the nine-month period ended September 30, 2008.








Segment
Operations





Television





Net Revenue. Net revenue in
our television segment decreased to $32.0 million for the three-month period
ended September 30, 2009 from $37.5 million for the three-month period ended
September 30, 2008, a decrease of $5.5 million. The decrease was primarily
attributable to a decrease in local and national advertising rates, which in
turn was primarily due to the continuing weak economy. We also generated $2.4
million in retransmission consent revenue.





Net
revenue in our television segment decreased to $92.0 million for the nine-month
period ended September 30, 2009 from $112.5 million for the nine-month period
ended September 30, 2008, a decrease of $20.5 million. The decrease was
primarily attributable to a decrease in local and national advertising rates,
which in turn was primarily due to the continuing weak economy. We also
generated $7.2 million in retransmission consent revenue. We anticipate that we
will continue to generate retransmission consent revenue in future
periods.





Direct Operating Expenses.
Direct operating expenses in our television segment decreased to $13.0 million
for the three-month period ended September 30, 2009 from $16.4 million for the
three-month period ended September 30, 2008, a decrease of $3.4
million.  The decrease was primarily attributable to a decrease in
national representation fees and other expenses associated with the decrease in
net revenue and a decrease in salary expense due to reductions in personnel and
salary reductions.





Direct
operating expenses in our television segment decreased to $40.2 million for the
nine-month period ended September 30, 2009 from $48.5 million for the nine-month
period ended September 30, 2008, a decrease of $8.3 million.  The
decrease was primarily attributable to a decrease in national representation
fees and other expenses associated with the decrease in net revenue and a
decrease in salary expense due to reductions in personnel and salary
reductions.





Selling, General and Administrative
Expenses. Selling, general and administrative expenses in our television
segment decreased to $4.6 million for the three-month period ended September 30,
2009 from $5.5 million for the three-month period ended September 30, 2008, a
decrease of $0.9 million. The decrease was primarily attributable to a decrease
in salary expense due to reductions in personnel and salary reductions and
employee benefits.





Selling,
general and administrative expenses in our television segment decreased to $14.9
million for the nine-month period ended September 30, 2009 from $16.6 million
for the nine-month period ended September 30, 2008, a decrease of $1.7 million.
The decrease was primarily attributable to a decrease in salary expense due to
reductions in personnel and salary reductions and employee
benefits.





Radio





Net Revenue. Net revenue in
our radio segment decreased to $18.7 million for the three-month period ended
September 30, 2009 from $23.5 million for the three-month period ended September
30, 2008, a decrease of $4.8 million. The decrease was primarily attributable to
a decrease in local and national advertising rates, which in turn was primarily
due to the continuing weak economy.


24


Net
revenue in our radio segment decreased to $49.1 million for the nine-month
period ended September 30, 2009 from $67.0 million for the nine-month period
ended September 30, 2008, a decrease of $17.9 million. The decrease was
primarily attributable to a decrease in local and national advertising sales and
advertising rates, which in turn was primarily due to the continuing weak
economy.


There has
been a general slowing of growth in the radio industry over the last few years,
which has had a negative impact on net revenue in our radio segment. We believe
that this trend will continue for the foreseeable future. Additionally, radio
advertising revenue is expected to continue to be negatively impacted because of
decreases in television advertising rates, which make television advertising
more affordable, combined with a general perception in the marketplace that
there is an enhanced branding power to advertising on television relative to
radio.





Direct Operating Expenses.
Direct operating expenses in our radio segment decreased to $8.0 million for the
three-month period ended September 30, 2009 from $9.2 million for the
three-month period ended September 30, 2008, a decrease of $1.2 million. The
decrease was primarily attributable to a decrease in expenses associated with
the decrease in net revenue and a decrease in salary expense due to reductions
in personnel and salary reductions.





Direct
operating expenses in our radio segment decreased to $23.5 million for the
nine-month period ended September 30, 2009 from $27.7 million for the nine-month
period ended September 30, 2008, a decrease of $4.2 million. The decrease was
primarily attributable to a decrease in expenses associated with the decrease in
net revenue and a decrease in salary expense due to reductions in personnel and
salary reductions.





Selling, General and Administrative
Expenses. Selling, general and administrative expenses in our radio
segment decreased to $5.0 million for the three-month period ended September 30,
2009 from $5.9 million for the three-month period ended September 30, 2008, a
decrease of $0.9 million. The decrease was primarily attributable to decreases
in salary expense due to reductions in personnel and salary reductions and
promotional spending.





Selling,
general and administrative expenses in our radio segment decreased to $13.5
million for the nine-month period ended September 30, 2009 from $16.4 million
for the nine-month period ended September 30, 2008, a decrease of $2.9 million.
The decrease was primarily attributable to decreases in salary expense due to
reductions in personnel and salary reductions and promotional
spending.








Liquidity
and Capital Resources





As a
result of the ongoing global financial crisis and the recession, and their
impact on the advertising marketplace and our customers, we have experienced
declining net revenues, which have had a significant negative impact on our cash
flows and consolidated adjusted EBITDA as defined as net income (loss) plus loss
(gain) on sale of assets, depreciation and amortization, non-cash impairment
charge, non-cash stock-based compensation included in operating and corporate
expenses, net interest expense, loss on debt extinguishment, loss from
discontinued operations, income tax expense (benefit), equity in net income
(loss) of nonconsolidated affiliate and syndication programming amortization
less syndication programming payments.  For a reconciliation of
consolidated adjusted EBITDA to cash flow from operating activities, its most
directly comparable GAAP financial measure, please see page 21. At
September 30, 2009, our total consolidated debt outstanding was $363.9
million.





We have
taken a number of steps to address our liquidity as result of the decline in our
consolidated adjusted EBITDA. As a result of management’s budgeting process for
2009, taking into consideration the impact that the further rapid deterioration
of the economy could have on our results of operation, we amended our syndicated
bank credit facility agreement on March 16, 2009. Among other things, the
amendment requires compliance with a maximum allowed leverage ratio covenant,
calculated as the ratio of consolidated total debt outstanding to
trailing-twelve-month consolidated adjusted EBITDA. In addition, the amendment
imposes certain additional restrictions on our liquidity and operations,
including a significantly higher interest rate on outstanding principal and a
sweep of 75% of quarterly excess cash flow, as defined in the amendment, to
repay principal on our outstanding consolidated debt.  At the time we
entered into the amendment to our syndicated bank credit facility agreement in
the first quarter of 2009, we made a prepayment of $40 million to reduce the
outstanding amount of our term loans.  See “Syndicated Bank Credit
Facility” below.





In order
to maintain compliance with the maximum allowed leverage ratio covenant, we will
need to achieve certain quarterly, trailing-twelve-month consolidated adjusted
EBITDA targets. At September 30, 2009, our cash balance was $20.8 million, our
debt outstanding under our syndicated bank credit facility was $361.9 million
and we had other debt of $2.0 million.


25


Under the
amended syndicated bank credit facility agreement, our debt to
trailing-twelve-month consolidated adjusted EBITDA ratio is required to be below
6.75 at the end of the fourth quarter of 2009, below 6.50 at the end of the
first two quarters of 2010 and below 6.25 at the end of the third quarter of
2010.  Since consolidated adjusted EBITDA is based on a





We have
also implemented significant cost-saving measures, including reductions in
personnel, executive bonuses, employee benefits, general corporate expense and
capital expenditures in the fourth quarter of 2008, and reductions in salary
expense, promotional expense, bonuses, general corporate expense and capital
expenditures in the first quarter of 2009. We currently estimate that these
cost-saving measures have resulted in an expense reduction of approximately $14
million for the nine-month period ended September 30, 2009.  We
currently anticipate that these cost-saving measures will result in expense
reductions of approximately $6 million during the fourth quarter of 2009.
Through our ongoing efforts to improve our profitability and cash flows, we are
continuing to review our business for areas of possible additional improvement,
greater efficiency and further cost reductions.





We
believe that, as a result of these cost-saving measures and the amendment of our
syndicated bank credit facility agreement discussed above, we will be able to
achieve the trailing-twelve-month consolidated adjusted EBITDA targets under our
amended syndicated bank credit facility agreement, and, therefore, we believe
that we will be able to maintain compliance with the maximum allowed leverage
ratio covenant under our amended syndicated bank credit facility agreement for
at least the next twelve months. However, there is no assurance that these
actions will be successful or that further adverse events outside of our control
may arise that would result in our inability to comply with the maximum allowed
leverage ratio covenant under our amended syndicated bank credit facility
agreement. In such event, we would consider a range of transactions or
strategies to address any such situation.  For example, we might
decide to use remaining cash resources to prepay a portion of our outstanding
debt, which may result in limitations on available working capital.
Alternatively, in such event, to meet the our cash requirements and avoid
failing to comply with the maximum allowed leverage ratio covenant, we might
seek to obtain a further waiver or amendment to our amended syndicated bank
credit facility agreement, refinance our existing debt, divest non-core assets
or operations and/or obtain additional equity or debt financing. There is no
assurance that any such transactions, or any other transactions or strategies we
might consider, could be consummated on terms satisfactory to us or at
all.





In the
event that we believed that we were going to fail to comply with the maximum
leverage ratio covenant or any other financial ratios under our amended
syndicated bank credit facility agreement, among other actions we might take, we
would likely seek to obtain a waiver or further amendment from our lenders. If
we were unable to obtain such a waiver or amendment, or be in a position to take
one of the other actions described or contemplated in the previous paragraph, we
could violate a financial covenant or ratio, which in turn could result in an
event of default under our amended syndicated bank credit facility agreement. If
an event of default were to occur and continue, lenders holding more than 50% of
the loans and commitments outstanding under the syndicated bank credit facility
could elect to accelerate the maturity of those loans outstanding under the
syndicated bank credit facility. Among the consequences of such actions, we
might be precluded from accessing any available borrowings under our revolving
credit facility, and we might be required to repay all amounts then outstanding
under the syndicated bank credit facility.





While we
have a history of operating losses in some periods and operating income in other
periods, we also have a history of generating significant positive cash flows
from our operations. We reported a net loss of $15.6 million and had positive
cash flow from operations of $10.2 million for the nine-month period ended
September 30, 2009. Additionally, as of September 30, 2009, we had an
accumulated deficit of $837.7 million. We expect to fund working capital
requirements, capital expenditures and payments of principal and interest on
outstanding indebtedness, with cash on hand, and cash flows from operations. We
currently anticipate that funds generated from operations, including cost-saving
measures we have taken, and available borrowings under our syndicated bank
credit facility will be sufficient to meet our anticipated cash requirements for
at least the next twelve months.


26





Syndicated
Bank Credit Facility





In
September 2005, we entered into a syndicated bank credit facility with a $650
million senior secured syndicated bank
credit facility, consisting of a 7 1⁄2 year $500 million term loan and a 6 1⁄2 year
$150 million revolving facility. The term loan under the syndicated bank credit
facility has been drawn in full, the proceeds of which were used (i) to
refinance $250 million outstanding under our former syndicated bank credit
facility, (ii) to complete a tender offer for our previously outstanding
$225 million senior subordinated notes, and (iii) for general corporate
purposes.  The term loan matures in 2013 and the revolving facility
expires in 2012. Our ability to make additional borrowings under the syndicated
bank credit facility is subject to compliance with certain financial covenants,
including financial ratios, and other conditions set forth in the syndicated
bank credit facility.





On March
16, 2009, we entered into an amendment to our syndicated bank credit facility
agreement. Pursuant to this amendment, among other things:





•
            The
      interest that we pay under the credit facility increased.  Both
      the revolver and term loan borrowings under the amendment bear interest at
      a variable interest rate based on either LIBOR or a base rate, in either
      case plus an applicable margin that varies depending upon our leverage
      ratio. Borrowings under both our revolver and term loan bear interest at
      LIBOR plus a margin of 5.25% when the leverage ratio is greater than or
      equal to 5.0.  When the leverage ratio is less than 5.0 but
      greater than or equal to 4.0, borrowings under both our revolver and term
      loan will bear interest at LIBOR plus a margin of 4.25%. When the leverage
      ratio is less than 4.0, borrowings under both our revolver and term loan
      will bear interest at LIBOR plus a margin of 3.25%.  The term
      loan currently bears interest at LIBOR plus a margin of 5.25%, for a total
      interest rate of 5.54% at September 30, 2009. As of September 30, 2009,
      $361.9 million of the term loan was
outstanding.





•
            The
      total amount of our revolver facility was reduced from $150 million to $50
      million. Borrowings under the revolver are restricted to $5 million in the
      aggregate during any rolling 30-day period when the leverage ratio is less
      than 1.0 of the maximum allowable ratio during the applicable period. New
      conditions have been added for loans under the revolver facility greater
      than $5 million. The revolving facility bears interest at LIBOR plus a
      margin ranging from 3.25% to 5.25% based on leverage covenants. As of
      September 30, 2009, we had approximately $1.0 million in outstanding
      letters of credit and $49 million was available under the revolving
      facility for future borrowings. In addition, we pay a quarterly unused
      commitment fee ranging from 0.25% to 0.50% per annum, depending on the
      level of facility used.





•
            There
      are more stringent financial covenants relating to maximum allowed
      leverage ratio, maximum capital expenditures and fixed charge coverage
      ratio. Beginning March 16, 2009, through December 31, 2009, the
      maximum allowed leverage ratio, or the ratio of consolidated total debt to
      trailing-twelve-month consolidated adjusted EBITDA, is 6.75. The maximum
      allowed leverage ratio decreases to 6.50 in the first quarter of 2010. On
      September 30, 2010 the maximum allowed leverage ratio decreases to
      6.25 and on December 31, 2010 the maximum allowed leverage ratio
      decreases to 6.0. Beginning March 31, 2011, and through the term of
      the agreement, the maximum allowed leverage ratio is 5.50. The actual
      leverage ratio was 6.7 to 1 as of September 30,
      2009.  Therefore, we were in compliance with this covenant as of
      this date.  From March 31, 2009, through the term of the
      agreement, the minimum required fixed charge coverage ratio is
      1.15.





•
            There
      is a mandatory prepayment clause for 100% of the proceeds of certain asset
      dispositions, regardless of our leverage ratio.  In addition, if
      we have excess cash flow, as defined in our syndicated bank credit
      facility, 75% of such excess cash flow must be used to reduce our
      outstanding loan balance on a quarterly
basis.





•
            Beginning
      March 31, 2009, the senior leverage ratio and net leverage ratio were
      eliminated.





•
            Capital
      expenditures may not exceed $10 million in each of 2009 and
      2010.





•
            We
      are restricted from making acquisitions and investments when the leverage
      ratio is greater than 4.0, with an exception to permit the completion of
      the acquisition of television assets serving the Reno, Nevada
      market.





•
            We
      are restricted from making future repurchases of shares of our common
      stock, except under a limited circumstance, which we utilized in May
      2009 and may utilize again in the
  future.





•
            We
      are restricted from making any further debt repurchases in the secondary
      market.





The
amendment also contains additional covenants, representations and provisions
that are usual and customary for credit facilities of this type.  All
other provisions of our syndicated bank credit facility agreement, as amended,
remain in full force and effect unless expressly amended or modified by the
amendment.


27


At the time
of entering into this amendment, we made a prepayment of $40 million to reduce
the outstanding amount of our term loans and paid our lenders an amendment
fee.





We
recorded a loss on debt extinguishment of $4.7 million for fees, unamortized
finance costs and interest rate swap agreement termination costs associated with
the amendment to the syndicated bank credit facility during the nine-month
period ended September 30, 2009.





The
syndicated bank credit facility is secured by substantially all of our assets,
as well as the pledge of the stock of substantially all of our subsidiaries,
including the special purpose subsidiary formed to hold our FCC licenses. The
syndicated bank credit facility contains customary events of default. If an
event of default occurs and is continuing, we might be required to repay all
amounts then outstanding under the syndicated bank credit facility. Lenders
holding more than 50% of the loans and commitments under the syndicated bank
credit facility may elect to accelerate the maturity of loans upon the
occurrence and during the continuation of an event of default.





The
syndicated bank credit facility contains certain financial covenants relating to
maximum leverage ratio, maximum capital expenditures and minimum fixed charge
coverage ratio. The covenants become increasingly restrictive in the later years
of the syndicated bank credit facility. The syndicated bank credit facility also
requires us to maintain FCC licenses for broadcast properties and contains
restrictions on the incurrence of additional debt, the payment of dividends, the
repurchase of shares of our own common stock, the making of acquisitions and the
sale of assets.





Derivative
Instruments





We use
interest rate swap agreements to manage our exposure to the risks associated
with changes in interest rates.  We do not enter into derivative
instruments for speculation or trading purposes.  As of September 30,
2009, we had three interest rate swap agreements with a $206 million aggregate
notional amount, with quarterly reductions, that expire on October 1, 2010, and
a fourth interest rate swap agreement with a $155.9 million notional amount,
with quarterly increases, that also expires on October 1, 2010.  The
three interest rate swap agreements convert a portion of the variable rate term
loan into a fixed rate obligation of 9.71%, which includes a margin of
5.25%.  The fourth interest rate swap agreement converts a portion of
the variable rate term loan into a fixed rate obligation of 10.31%, which
includes a margin of 5.25%.  It is expected that the term loan amount
will not exceed the notional amount of the four interest rate swap
agreements.  As of September 30, 2009 and 2008, these interest rate
swap agreements were not designated for hedge accounting treatment, and as a
result, changes in their fair values are reflected currently in
earnings.





As of
September 30, 2009, the fair value of the interest rate swap agreements was a
liability of $19.4 million and is classified in other short-term liabilities on
our balance sheet.  As of December 31, 2008, the fair value of the
interest rate swap agreements was a liability of $23.2 million and is classified
in other short-term liabilities on our balance sheet.





For the
three-month period ended September 30, 2009, we recognized a decrease of $1.3
million in interest expense related to the increase in fair value of the
interest rate swap agreements.  For the three-month period ended
September 30, 2008, we recognized an increase of $0.4 million in interest
expense related to the decrease in fair value of the interest rate swap
agreements.





For the
nine-month period ended September 30, 2009, we recognized a decrease of $3.8
million in interest expense related to the increase in fair value of the
interest rate swap agreements.  For the nine-month period ended
September 30, 2008, we recognized an increase of $3.6 million in interest
expense related to the decrease in fair value of the interest rate swap
agreements.





Debt
and Equity Financing





On
November 1, 2006, our Board of Directors approved a stock repurchase program. We
were authorized to repurchase up to $100 million of our outstanding Class A
common stock from time to time in open market transactions at prevailing market
prices, block trades and private repurchases. The extent and timing of any
repurchases depended on market conditions and other factors. We completed this
$100 million repurchase program in the second quarter of 2008.





On April
7, 2008, our Board of Directors approved another $100 million stock repurchase
program. We repurchased a total of 20.8 million of our outstanding Class A
common stock under this program since its inception through September 30, 2009.
We are currently restricted from making future repurchases of shares of our
common stock under the terms of our amended syndicated bank credit facility
except under a limited circumstance, which we utilized in May 2009 and
may utilize again in the future.


28




Consolidated
Adjusted EBITDA





Consolidated
adjusted EBITDA (as defined below) decreased to $40.3 million for the nine-month
period ended September 30, 2009 from $60.2 million for the nine-month period
ended September 30,  2008, a decrease of $19.9 million, or 33%. As a
percentage of net revenue, consolidated adjusted EBITDA decreased to 29% for the
nine-month period ended September 30, 2009 from 34% for the nine-month period
ended September 30, 2008.





Consolidated
adjusted EBITDA means net income (loss) plus loss (gain) on sale of assets,
depreciation and amortization, non-cash impairment charge, non-cash stock-based
compensation included in operating and corporate expenses, net interest expense,
loss on debt extinguishment, loss from discontinued operations, income tax
expense (benefit), equity in net income (loss) of nonconsolidated affiliate and
syndication programming amortization less syndication programming payments. We
use the term consolidated adjusted EBITDA because that measure is defined in our
syndicated bank credit facility and does not include loss (gain) on sale of
assets, non-cash depreciation and amortization, non-cash impairment charge,
non-cash stock-based compensation, net interest expense, loss on debt
extinguishment, loss from discontinued operations, income tax expense (benefit),
equity in net income (loss) of nonconsolidated affiliate and syndication
programming amortization and does include syndication programming
payments.





Since our
ability to borrow from our syndicated bank credit facility is based on a
consolidated adjusted EBITDA financial covenant, we believe that it is important
to disclose consolidated adjusted EBITDA to our investors. Our syndicated bank
credit facility contains certain financial covenants relating to the maximum
allowed leverage ratio, maximum capital expenditures and minimum fixed charge
coverage ratio. The maximum allowed leverage ratio, or the ratio of consolidated
total debt to trailing-twelve-month consolidated adjusted EBITDA, affects our
ability to borrow from our syndicated bank credit facility. The maximum allowed
leverage ratio also affects the interest rate charged for revolving loans, thus
affecting our interest expense. Under our syndicated bank credit facility, our
maximum allowed leverage ratio may not exceed 6.75 to 1. The actual leverage
ratio was as follows (in each case as of September 30): 2009, 6.7 to 1; 2008,
5.7 to 1. Therefore, we were in compliance with this covenant at each of those
dates. We entered into an amendment to our credit facility agreement in March
2009, so we were not subject to the same calculations and covenants in prior
years. However, for consistency of presentation, the foregoing historical ratios
assume that our current definition had been applicable for all periods
presented.





While
many in the financial community and we consider consolidated adjusted EBITDA to
be important, it should be considered in addition to, but not as a substitute
for or superior to, other measures of liquidity and financial performance
prepared in accordance with accounting principles generally accepted in the
United States of America, such as cash flows from operating activities,
operating income and net income.  As consolidated adjusted EBITDA
excludes non-cash (gain) loss on sale of assets, non-cash depreciation and
amortization, non-cash impairment charge, non-cash stock-based
compensation,  net interest expense, loss on debt extinguishment, loss
from discontinued operations, income tax expense (benefit), equity in net income
(loss) of nonconsolidated affiliate and syndication programming amortization and
includes syndication programming payments, consolidated adjusted EBITDA has
certain limitations because it excludes and includes several important non-cash
financial line items. Therefore, we consider both non-GAAP and GAAP measures
when evaluating our business. Consolidated adjusted EBITDA is also used to make
executive compensation decisions.





Consolidated
adjusted EBITDA is a non-GAAP measure. For a reconciliation of consolidated
adjusted EBITDA to cash flows from operating activities, its most directly
comparable GAAP financial measure, please see page 19.





Cash
Flow





Net cash
flow provided by operating activities was $10.2 million for the nine-month
period ended September 30, 2009 compared to net cash flow provided by operating
activities of $33.0 million for the nine-month period ended September 30,
2008.  We had a net loss of $15.6 million for the nine-month period
ended September 30, 2009, which was partially offset by non-cash expenses,
including depreciation and amortization expense of $15.9 million, deferred
income taxes of $8.5 million and a carrying value adjustment of $2.7 million. We
expect to continue to have positive cash flow from operating activities for at
least the remainder of 2009.





Net cash
flow used in investing activities was $9.1 million for the nine-month period
ended September 30, 2009, compared to net cash flow provided by investing
activities of $64.8 million for the nine-month period ended September 30, 2008.
During the nine-month period ended September 30, 2009, we spent $5.4 million on
net capital expenditures and $3.8 million related to the acquisition of
television assets in Reno, Nevada. During the nine-month period ended September
30, 2008, we received $101.5 million from the sale of our outdoor advertising
business and spent $13.4 million on net capital expenditures and $22.9 million
related to the acquisition of radio assets in Orlando, Florida. We anticipate
that our capital expenditures will be approximately $6.5 million during the full
year 2009. Under the terms of our amended credit facility agreement, we are
restricted from making acquisitions and investments when the leverage ratio is
greater than 4.0, which is the case at the present time.


29


Net cash
flow used in financing activities was $44.6 million for the nine-month period
ended September 30, 2009, compared to $67.2 million for the nine-month period
ended September 30, 2008. During the nine-month period ended September 30, 2009,
we made net debt payments of $42.6 million, paid $1.2 million in fees and
expenses related to the amendment of our syndicated bank credit facility,
repurchased 1.3 million shares of our Class A common stock for $1.1 million
including transaction fees and received net proceeds of $0.3 million from the
sale of shares issued under our 2001 Employee Stock Purchase Plan. During the
nine-month period ended September 30, 2008, we repurchased 8.8 million shares of
our Class A common stock for $46.5 million including transaction fees,
repurchased 1.5 million shares of our Class U common stock for $10.4 million,
made net debt payments of $11.0 million and received net proceeds of $0.8
million from the sale of shares issued under our 2001 Employee Stock Purchase
Plan. Under the terms of our amended credit facility agreement, we are prevented
from making future repurchases of our Class A common stock except under a
limited circumstance, which we utilized in May 2009 and may utilize
again in the future.





In order
comply with the terms of our amended credit facility agreement, our capital
expenditures may not exceed $10 million in each of 2009 and 2010. During the
full year 2009, we anticipate that our capital expenditures will be
approximately $6.5 million.  We anticipate paying for these capital
expenditures out of net cash flow from operations.





In order
to broadcast high definition programming in the future, we intend to begin
construction at our studio control facilities in 2010, and at our production
control facilities in 2011 and 2012. We currently expect that the total cost of
this high definition upgrade at our local studio and control facilities will be
approximately $15 million. We intend to finance the high definition upgrade by
using net cash flow from operations.





The
amount of our anticipated capital expenditures may change based on future
changes in business plans, our financial condition and general economic
conditions.





ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





General





Market
risk represents the potential loss that may impact our financial position,
results of operations or cash flows due to adverse changes in the financial
markets. We are exposed to market risk from changes in the base rates on our
variable rate debt. However, since February 2007, we have had four swap
arrangements that convert the entire amount of our variable rate term loan into
a fixed rate obligation. Under our syndicated bank credit facility, if we exceed
certain leverage ratios we would be required to enter into derivative financial
instrument transactions, such as swaps or interest rate caps, in order to manage
or reduce our exposure to risk from changes in interest rates. Our current
policy prohibits entering into derivatives or other financial instrument
transactions for speculative purposes.





Interest
Rates





Our term
loan bears interest at LIBOR plus a margin of 5.25%, for a total interest rate
of 5.54% at September 30, 2009. As of September 30, 2009, $361.9 million of our
term loan was outstanding.  Our revolving facility bears interest at
LIBOR plus a margin ranging from 3.25% to 5.25% based on our leverage. As of
September 30, 2009, we had approximately $1 million in outstanding letters of
credit and $49 million was available under the revolving facility for future
borrowings. Our syndicated bank credit facility requires us to enter into
interest rate agreements if our leverage exceeds certain limits as defined in
our credit agreement.





As of
September 30, 2009, we had three interest rate swap agreements with a $206
million aggregate notional amount, with quarterly reductions, that expire on
October 1, 2010, and one interest rate swap agreement with a $155.9 million
notional amount, with quarterly increases, that also expires on October 1,
2010.  The three interest rate swap agreements convert a portion of
the variable rate term loan into a fixed rate obligation of 9.71 %, which
includes a margin of 5.25%.  The fourth interest rate swap agreement
converts a portion of the variable rate term loan into a fixed rate obligation
of 10.31 %, which includes a margin of 5.25%. It is expected that the term loan
amounts will not exceed the notional amount of the four interest rate swap
agreements.


30


We
recognize all of our derivative instruments as either assets or liabilities in
the consolidated balance sheet at fair value. The accounting for changes in the
fair value of a derivative instrument depends on whether it has been designated
and qualifies as part of a hedging relationship, and further, on the type of
hedging relationship. As of September 30, 2009, our interest rate swap
agreements were not designated for hedge accounting treatment, and as a result,
the fair value was a liability of $19.4 million and was classified as other
current liabilities on our balance sheet. For the three-month period ended
September 30, 2009, we recognized a decrease of $1.3 million of interest expense
related to the increase in fair value of the interest rate swap
agreements.





We
converted our variable rate term loan into a fixed rate obligation at September
30, 2005.  We currently anticipate that the aggregate notional amount
of our interest rate swap agreements will equal our loan amount
outstanding.  Since we converted our variable rate term loan into a
fixed rate obligation through October 1, 2010, an increase in the variable
interest rate or our bank credit facility would not currently affect interest
expense payments.  If the future interest yield curve decreases, the
fair value of the interest rate swap agreements will decrease and interest
expense will increase. If the future interest yield curve increases, the fair
value of the interest rate swap agreements will increase and interest expense
will decrease.








ITEM
4. CONTROLS AND PROCEDURES





We
carried out an evaluation, under the supervision and with the participation of
management, including our chief executive officer and chief financial officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended) as of the end of the period covered by this
quarterly report. Based upon that evaluation, our chief executive officer and
chief financial officer concluded that our disclosure controls and procedures
are effective in making known to them in a timely manner material information
relating to us (including our consolidated subsidiaries) that is required to be
included in our periodic SEC reports.





Our
management, including our chief executive officer and chief financial officer,
does not expect that our disclosure controls or our internal control over
financial reporting will prevent or detect all errors and all fraud. A control
system, no matter how well designed and operated, can provide only reasonable,
not absolute, assurance that the control system’s objectives will be met. The
design of any system of controls is based in part on certain assumptions about
the likelihood of future events, and there can be no assurance that any design
will succeed in achieving its stated goals under all potential future
conditions.





There was
no change in our internal control over financial reporting that occurred during
the period covered by this report that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.








PART
II.


OTHER
INFORMATION





ITEM
1. LEGAL PROCEEDINGS





We
currently and from time to time are involved in litigation incidental to the
conduct of our business, but we are not currently a party to any lawsuit or
proceeding which, in the opinion of management, is likely to have a material
adverse effect on us.





ITEM
1A.  RISK FACTORS





No
material change.





ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS





Issuer
Purchases of Equity Securities





On April 7, 2008, our
Board of Directors approved our current stock repurchase program. We are
authorized to repurchase up to $100 million of our outstanding Class A common
stock from time to time in open market transactions at prevailing market prices,
block trades and private repurchases. We are currently restricted from making
future repurchases of shares of our common stock under the terms of our amended
syndicated bank credit facility except under a limited circumstance, which
we utilized in May 2009 and may utilize again in the
future.






31


ITEM 3. DEFAULTS UPON SENIOR
SECURITIES





None.





ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





None.





ITEM
5. OTHER INFORMATION





None.





ITEM
6. EXHIBITS





The
following exhibits are attached hereto and filed herewith:





31.1
            Certification
      by the Chief Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002 and Rules 13a-14 and 15d-14 under the
      Securities Exchange Act of 1934.31.2
            Certification
      by the Chief Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002 and Rules 13a-14 and 15d-14 under the
      Securities Exchange Act of 1934.32
            Certification
      of Periodic Financial Report by the Chief Executive Officer and Chief
      Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.







SIGNATURE





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.




ENTRAVISION COMMUNICATIONS CORPORATIONBy:
              /s/ CHRISTOPHER
      T. YOUNGChristopher T.
      YoungExecutive
      Vice President, Treasurer
                and
      Chief Financial Officer


Date:
November 6, 2009


EXHIBIT
      INDEX





Exhibit
              Number
            
            Description
      of Exhibit31.1
            
            Certification
      by the Chief Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002 and Rules 13a-14 and 15d-14 under the
      Securities Exchange Act of 1934.31.2
            
            Certification
      by the Chief Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002 and Rules 13a-14 and 15d-14 under the
      Securities Exchange Act of 1934.32
            
            Certification
      of Periodic Financial Report by the Chief Executive Officer and Chief
      Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.




32